Trump's "Policy Fog" + Powell's Dilemma, the Market Hesitates

Author: BitpushNews Mary Liu

In the early hours of March 20, Beijing time, the Federal Reserve will announce its latest interest rate decision, followed by a press conference by Chairman Powell, as global markets hold their breath.

Financial markets are facing numerous uncertainties. What makes this meeting special is that it will comprehensively assess the impact of a series of new policies from the Trump administration on the U.S. economy. Federal Reserve policymakers will discuss the progress of inflation control and decide whether to adjust monetary policy.

The market has already come under pressure, Bitcoin consolidates and retreats

The optimistic sentiment lasted only a few days, and risk markets fell again ahead of the Federal Reserve's meeting. As of the time of writing, the price of Bitcoin is approximately $82,715, down 1.5% in the past 24 hours.

Mainstream cryptocurrencies such as Solana, Ethereum, and XRP have seen more significant declines. The U.S. stock market is also under pressure, with both the Nasdaq and S&P 500 indices experiencing declines. Concerns are growing that the Federal Reserve may not immediately ease its policies, despite the slight slowdown in inflation data for February, which is not significant and is merely a single month’s data.

The Federal Reserve is likely to stand pat, but the "dot plot" hides secrets

The market generally expects the Federal Reserve to maintain the current target range for the federal funds rate at 4.25%-4.50%. According to CME Group's FedWatch tool, traders believe the likelihood of a rate cut in March is negligible.

Previously, Federal Reserve officials have repeatedly emphasized a "wait-and-see" approach, partly due to the significant uncertainty brought about by President Trump's economic policies, which have begun to affect business and consumer confidence, leading to stock market declines and concerns about economic recession.

The focus of this meeting will be the "Economic Projections Summary" released alongside the policy statement, particularly the highly anticipated "dot plot." This chart will show the median forecasts for future federal funds rates from the 19 committee members and is an important basis for the market's speculation on future interest rate paths.

Although Nomura analysts expect little change in the median forecast of this "dot plot," any slight adjustments could trigger significant market volatility, given the tense market sentiment and uncertainty regarding future rate cuts.

Under Trump's "policy fog": The shadow of stagflation looms, Wall Street sounds the alarm

Recent economic data and market sentiment indicate that analysts are beginning to worry about the risk of "stagflation," which means that if bad news emerges for the economy in the future, U.S. stocks may also decline.

In simple terms, there are concerns that Trump's policies may lead to slower economic growth while prices rise, which is stagflation. Wall Street institutions have already begun to worry about this and adjust their expectations.

Several institutions, including JPMorgan, Goldman Sachs, and Morgan Stanley, have recently lowered their economic growth forecasts for the U.S., primarily because they believe that the Trump administration's restrictive trade and immigration policies may adversely affect the economy.

Looking at inflation, although the price index for February shows a slowdown in inflation, Goldman Sachs economists point out that considering the Trump administration has already begun imposing tariffs and may escalate them in the future, the Federal Reserve may have to reconsider their inflation forecasts. Goldman Sachs even predicts that the Federal Reserve may raise the core inflation rate to 2.8% in its 2025 economic forecast while lowering the GDP growth rate to 1.8%, mainly due to the impact of tariff policies.

How do Federal Reserve expectations affect the nerves of the crypto market?

Cryptocurrencies like Bitcoin are typically viewed as "risk assets," and their price movements are closely related to investors' risk appetite. In a high-interest-rate environment, relatively safe assets like bonds become more attractive, potentially leading to capital flowing out of high-risk assets like cryptocurrencies. Currently, Bitcoin's price hovers around $83,000, and the market sentiment index remains in the "fear" zone, which may indicate that the market has already anticipated potential bearish news.

According to predictions from Polymarket participants, economic uncertainty and global tensions may exacerbate bearish pressure in the cryptocurrency market. Polymarket data shows that the likelihood of Bitcoin closing this week between $81,000 and $87,000 is 51%.

Conclusion

The Federal Reserve's policy statement and Powell's remarks will undoubtedly set the tone for the short-term direction of the cryptocurrency market. Dovish signals may ignite hopes for a market rebound, while hawkish stances could prolong the current downward trend. Given the already pessimistic market sentiment, any slightly positive signals could act as a catalyst for price increases. However, for cryptocurrency investors, remaining vigilant and cautious is always the best strategy to cope with market volatility.