The Federal Reserve maintains interest rates unchanged, slows down balance sheet reduction to release liquidity, BTC returns to 86K.

The Federal Reserve of the United States maintained the benchmark funds interest rate in the range of 4.25%-4.5% and slowed down the pace of balance sheet reduction. The three major U.S. stock indices rose together, Bitcoin surged to 86K, Ether also returned above two thousand dollars, and Ripple XRP soared over 11% due to the SEC's withdrawal of the lawsuit against Ripple.

The Federal Reserve keeps interest rates unchanged, and the inflation caused by tariffs is temporary.

Trump's ambitious and uncertain policy agenda puts increasing pressure on the economy and the Federal Reserve's ability to maintain normal economic operations. Trump's continuous changes to the plans for imposing tariffs on U.S. trade partners have raised concerns about an economic slowdown and sparked new worries about inflation, making investors more attentive to the direction of the Federal Reserve.

Federal Reserve Chair Powell acknowledged that the significant policy changes by President Trump have brought about a high level of uncertainty, but he reiterated that the central bank is not in a hurry to adjust borrowing costs. He stated that officials can wait until the effects of these policies on the economy become clearer before taking action.

Powell stated:

Inflation has begun to rise, and we believe this is partly a response to tariffs. Further progress this year may be delayed.

Powell stated that his baseline forecast is that any inflation increase triggered by tariffs will be "temporary," but he later added that it is difficult to say with certainty to what extent inflation is caused by tariffs rather than other factors.

Downgrade economic growth and upgrade inflation forecast

The new quarterly economic forecast indicates that Federal Reserve officials have lowered their economic growth rate predictions for this year, while raising inflation expectations. The report also shows that, according to median estimates, officials continue to expect a half-percentage-point rate cut this year, which means there will be two decisions to cut by 25 basis points each.

Officials have raised their median estimate for the so-called core inflation rate at the end of this year from 2.5% to 2.8%. They have lowered their expectations for economic growth in 2025 from 2.1% to 1.7%. Additionally, the unemployment rate expectation for the end of this year has been raised from the previous 4.3% to 4.4%.

Powell refutes recent abnormal soft data, the economy looks very healthy.

Recently, inflation has remained high, and with the ongoing escalation of the trade war, consumers' expectations for future price growth are also rising. Spending is slowing down, and consumer confidence is plummeting.

Powell stated that the likelihood of a recession is rising, but it is not high. He specifically pointed out that so-called soft data, such as market sentiment, highlights people's concerns, but he emphasized that the Federal Reserve's focus is on hard data. He refuted data from the University of Michigan, which indicates that long-term inflation expectations have risen sharply, calling it an "outlier."

He said:

We do understand that market sentiment has sharply declined, but economic activity has not decreased, so we are closely monitoring. I want to tell people that the economy looks very healthy.

Slow down the pace of tapering to alleviate market liquidity.

The Federal Reserve also stated that starting in April, it will lower the monthly limit on US Treasury securities that can mature without reinvestment from $25 billion to $5 billion. The limit on mortgage-backed securities will remain unchanged at $35 billion.

Multiple officials pointed out at the January meeting that it may be necessary to consider pausing or slowing the Federal Reserve's balance sheet reduction until the federal government is no longer facing the debt ceiling. The U.S. reached this limit in January.

The Federal Reserve has started to slow down the pace of asset portfolio reduction since June to alleviate potential pressures on money market interest rates.

Towards quantitative easing, BTC 86K

Although the Federal Reserve did not cut interest rates this time, slowing down the pace of balance sheet reduction provides more liquidity to the market and is seen as a significant step towards quantitative easing.

Yesterday, the three major U.S. stock indices rose together, Bitcoin increased to 86K, Ether also returned to above two thousand dollars, and Ripple (XRP) surged over 11% due to the SEC's withdrawal of the lawsuit against Ripple.

Among the top ten cryptocurrencies by market capitalization, all except for TRON (TRX) have performed well.

This article discusses the Federal Reserve maintaining interest rates, slowing the balance sheet reduction to release liquidity, and BTC returning to 86K, first appearing in Chain News ABMedia.