The Federal Reserve System kept the key policy parameters unchanged. The decision was made unanimously and reflects the regulator's cautious approach amid mixed signals from the economy.
The Federal Reserve published the minutes of the discount rate meetings for February and March. All 12 regional banks supported maintaining the rate at 3.75%.
The regulator maintains the pause.
At the joint meeting on March 18, the Fed also kept the federal funds rate range at 3.5–3.75%. The interest on reserves is fixed at 3.65%. The market expected clearer signals. They did not come.
The regulator continues to hold the pause, assessing the resilience of the current economic trajectory. This approach shows that the space for rate cuts is still limited.
The economy is neither overheating nor accelerating.
Regional Fed reports describe the economy as stable. The labor market remains balanced. Hiring is limited. Turnover is low. Wage growth is moderate. At the same time, there is a shortage of specialists in certain sectors, especially in healthcare.
This is an important signal. Wage pressure is not increasing, but structural problems in the labor market have not gone away.
Business is betting on technology.
Companies continue to invest in technology. There is a notable increase in investments in artificial intelligence-based solutions. Business is seeking efficiency.
Automation is seen as a way to maintain margins amid rising costs. At the same time, the impact of technology on employment is still limited. There is no mass displacement of workers.
Pressure is shifting to costs.
Tariff pressure on prices has weakened. This gives the market a short-term breather. But other factors are coming to the forefront. Costs outside of payroll are rising.
This is especially noticeable in energy and healthcare. These segments are beginning to form a new inflationary backdrop. In fact, the structure of inflation is changing.
The Fed maintains rigidity in details.
In addition to the key rate, the Fed has kept the parameters of the credit programs unchanged. The secondary credit rate is fixed at 4.25%. This is 50 basis points above the main rate. This configuration signals a maintenance of control over liquidity. The regulator is not looking to ease conditions prematurely.
Unanimity as a signal to the market.
All participants voted to maintain the policy. This is a rare level of consensus within the system. Even in the absence of individual members at the February meeting, the consensus in March was complete. For the market, this is an important marker. There is no division within the Fed regarding the current strategy.
Why is the Fed in no hurry to lower the rate?
The main reason is uncertainty. Inflation is slowing down, but not fast enough to confidently move towards easing. An additional factor is the rising costs for businesses. This can support prices even in the face of weak demand.
In this situation, a premature rate cut could bring back inflationary pressure. The Fed is taking this into account.
What does this mean for the markets?
The rate remains high longer than previously expected. This changes the risk assessment. Cheap money will not come quickly. Liquidity remains limited. For the markets, this means tighter financing conditions and cautious capital behavior.
Reaction of the crypto market.
For bitcoin, this is neutral in the short term. Rate cuts are not accelerating, but tightening is not happening either. However, the situation is more complicated for riskier assets.
They are more dependent on liquidity inflows. If the Fed continues to hold the rate, the market will remain selective.
What's next?
The Fed has given a clear signal. The regulator is in no hurry to change course and is waiting for new data. The key factor will be inflation. It will determine the next steps.
If the slowdown continues, the window for rate cuts will open. If not, the pause will be prolonged. The market is entering a phase of expectation. And it is macro data that will now determine the direction of movement.
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