The Federal Reserve is widely expected to leave interest rates unchanged this week, with markets already treating the decision itself as close to a settled matter. CME FedWatch futures, as of Friday, showed a 96% probability that the Fed would keep the federal funds rate in the 3.5%-3.75% range. For bitcoin and the U.S. dollar, attention is shifting to what Chair Jerome Powell says after the meeting.
Markets see a pause after three quarter-point cuts
The expected hold follows three consecutive rate cuts of 25 basis points each. That view lines up with Powell’s message from December, when he said the Fed’s voting committee would delay additional cuts into 2026. Minneapolis Fed President Neel Kashkari, a voting member of the Federal Open Market Committee this year, also told The New York Times that it is “way too soon” to cut rates again.
Unless the Fed surprises markets with an unexpected cut, the policy announcement itself may not trigger the biggest move. The source material notes that such a surprise could weaken the dollar while lifting bitcoin and equities.
The real question is whether the pause sounds hawkish or dovish
Traders are watching for the message around the pause, not just the pause itself. A hawkish interpretation would come if Powell stresses lingering inflation risks, which could reduce expectations for future cuts and weigh on risk assets. A dovish interpretation would suggest Wednesday’s hold is temporary and that rate cuts could resume in coming months, a setup that could support bitcoin.
Morgan Stanley expects the Fed to lean dovish by keeping language in its policy statement about “considering the range and timing for further adjustments to the target range.” In that case, the Fed would acknowledge economic resilience while still keeping the door open to future easing.
Dissenting votes could add to easing expectations
Another point for markets is whether any officials formally oppose the pause. According to the report, Trump appointee Stephen Miran is expected to dissent in favor of a larger 50-basis-point cut. If the number of dissenters rises, traders could read that as a stronger signal that easing remains under discussion, which would be supportive for stocks and bitcoin.
Powell’s comments on other politically sensitive issues may also matter. The report says traders will be listening for his views on President Donald Trump’s affordability policy push and on threats to the Fed’s independence. Those remarks would not change the rate decision, but they could affect how markets price the policy path over the next several months.
Forecasts for the rest of the year still differ
For the remainder of the year, most observers cited in the report, with the exception of JPMorgan, still expect the Fed to cut rates once or twice. JPMorgan stands apart, seeing no move this year and a rate hike next year. That split leaves Powell’s wording as the main catalyst for bitcoin and the dollar once the headline decision is out.