The US Fed acknowledged that the economy is stuck between a weak labor market and "sticky" inflation. This is the main essence of the accompanying letter to the interest rate decision.
There is no good news for risky asset markets - nothing is visible in the letter.
Although the tone of the letter is as cautious as possible: economic activity is steadily growing, but job creation remains weak, inflation is still above target, and uncertainty regarding the forecast is heightened.
Key highlights of the statement:
- The economy is expanding at a steady pace, but the labor market does not look strong.
- Inflation remains somewhat elevated, the target is still 2%.
- Uncertainty regarding the forecast is high, risks and consequences of events in the Middle East are noted separately.
- Further decisions will depend entirely on incoming data and the balance of risks under the dual mandate.
- GDP forecasts: +2.4% in 2026, +2.3% in 2027. Revised upward.
- Unemployment forecasts: 4.4% in 2026. No changes.
- The overall personal consumption price index: 2.7% in 2026, the core index - also 2.7%. A return to the target level of 2.0% is only expected by 2028 (!). So here is a revision upward.
For the rate, the median forecast is 3.4% at the end of 2026, 3.1% for 2027-2028. Overall, only one rate cut of 0.25 percentage points is expected in 2026.
Separately, voting is important. The decision again was not unanimous, but there is no visible split: only Stephen I. Miran voted against, wanting to reduce the rate by 0.25 percentage points at this meeting. He is always against pauses, and when everyone voted for a reduction, he wanted even greater cuts. He is a Trump person.
TOTAL: The Fed notes a slowdown in employment and rising uncertainty, but does not see sufficient grounds for easing while inflation is above the target. The main risk on the horizon is a stagflationary shade: growth is no longer vigorous, but inflation still prevents a rate cut. Stagflation, we believe, is already a real threat knocking at the door. But the Fed is not yet speaking about this aloud.
For the crypto market, today's decision and statement from the Fed will be positive if after the meeting yields start to decline and the dollar weakens, then risk assets will receive support.
The negative scenario - if geopolitics and oil again drive up inflation expectations and push yields higher. Then crypto assets may face a new wave of pressure because liquidity will become even more expensive.
The Fed has left the market in a state of high sensitivity to data. This means that swings and "cuts" in macro data and statements from figures at Powell's level remain with us. Less than 10 minutes after we wait for the head of the Fed's speech.