TLDR
- Federal Reserve policy meeting Wednesday January 28 with rates expected to stay at 3.5%-3.75% based on 99% market consensus
- Powell’s press conference will determine if pause is hawkish or dovish, setting tone for bitcoin and risk asset performance
- Trump’s housing affordability plan includes $200 billion mortgage bond buy that analysts warn could fuel inflation
- Coordinated Fed and Bank of Japan dollar-yen intervention under consideration, creating volatility risk for bitcoin
- Most analysts project one to two rate cuts in 2026 despite pause, with dissenting votes potentially signaling dovish tilt
The Federal Reserve holds its policy meeting Wednesday with rates expected to remain unchanged. Markets price in a 99.3% probability the central bank maintains its 3.5%-3.75% target range. The Fed cut rates three consecutive times before this anticipated pause.
CME Group’s FedWatch tool showed 96% odds for steady rates heading into the meeting. Polymarket prediction markets placed the probability even higher. Any rate change carries minimal likelihood according to futures pricing.
Fed officials delivered three quarter-point reductions in recent months. Those cuts lowered rates from higher levels. Inflation metrics and labor market data showed limited movement since December, reducing pressure for additional easing.
Neel Kashkari, Minneapolis Fed President with voting power this year, told The New York Times more cuts are premature. His comments support the hold decision. The Federal Open Market Committee will release its policy statement after the meeting concludes.
Powell Press Conference Drives Market Direction
Jerome Powell’s post-decision press conference holds more importance than the rate announcement itself. His remarks on future policy adjustments will influence bitcoin prices and equity markets. Investors want to know if this pause is temporary or signals an extended hold period.
Morgan Stanley analysts expect dovish language in the policy statement. They predict the Fed will keep wording about “considering the range and timing for further adjustments.” This language preserves the option for future rate reductions.
A hawkish pause means Powell emphasizes persistent inflation risks. This stance would reduce rate-cut expectations and pressure bitcoin lower. A dovish pause suggests cuts resume within months, potentially supporting cryptocurrency prices.
Stephen Miran, appointed by President Trump to the Fed board, is expected to vote against holding rates. He favors a 50-basis-point cut. More dissenting votes would boost expectations for future easing and benefit risk assets like bitcoin.
Most market observers forecast one or two rate cuts before year end. JPMorgan stands alone projecting no cuts in 2026 followed by a rate increase in 2027.
Housing Policy and Currency Intervention Add Complexity
Powell will field questions about Trump’s housing affordability initiatives. The president announced a $200 billion mortgage-backed securities purchase program. The administration claims this will lower borrowing costs for home buyers.
Trump also issued an executive order restricting institutional investors from purchasing single-family homes. Analysts warn these measures could accelerate housing demand and increase prices. Allianz Investment Management noted the mortgage purchases risk pulling demand forward and inflating home values.
ING analysts said Powell’s explanation for maintaining rates could strengthen the U.S. dollar. A stronger dollar typically pressures bitcoin and other dollar-based assets. Powell may struggle to argue conditions remain restrictive given recent market strength.
The chairman could also address Trump’s tariff policies. Markets already anticipate delayed inflationary effects as import costs filter to consumers. Powell faces questions about a Justice Department investigation Trump has criticized as political retaliation for insufficient rate cuts.
Reports indicate potential coordinated dollar-yen intervention between the Fed and Bank of Japan. The New York Fed conducted rate checks, a preliminary step before intervention. Such action would involve selling dollars to purchase yen.
Bitcoin demonstrates sensitivity to major currency movements. The cryptocurrency typically moves inverse to the dollar and correlates positively with the yen. When the Bank of Japan raised rates in August 2024, the yen strengthened and bitcoin dropped sharply.
Japan confronts yen weakness and elevated bond yields. Previous solo intervention attempts in 2022 and 2024 failed. Coordinated U.S.-Japan actions proved more effective historically.
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