Cryptocurrency markets fell as two significant macroeconomic developments occurred simultaneously. The first was the Fed’s decision, and the second was US President Donald Trump’s rejection of Iran’s proposal to reopen the Strait of Hormuz and his signaling of a new wave of military attacks.
Bitcoin and Altcoins Fall!
In fact, the Fed, in Jerome Powell’s final policy decision as Fed Chairman, kept interest rates unchanged, as expected. However, according to experts, what changed here was the Fed’s rhetoric on inflation.
The decision to keep interest rates unchanged was generally expected. What was unexpected was the change in how the Fed defines inflation. Previously, the Fed had described inflation as “somewhat high.” However, the Fed now states that inflation is high. Powell noted that inflation remains high and that rising energy prices, in particular, will create upward pressure in the short term. This change is of critical importance for risky assets like Bitcoin.
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This suggests that the interest rate cuts that markets were expecting later this year may be further away than previously anticipated.
At this point, Bitcoin (BTC) has fallen to around $75,700, down 1.7% during the day and 3.1% over the past week. Ethereum (ETH) has dropped 3.4% in 24 hours to around $2,240. The broader cryptocurrency market capitalization is down 1.6% to $2.53 trillion.
Morgan Stanley Revises FED Forecast!
This change in the Fed’s definition of inflation has also been reflected in the forecasts. In this regard, Morgan Stanley stated in its latest assessment that they expect the Fed to keep interest rates stable until the end of 2026.
This means the bank has revised its previous forecast. Morgan Stanley had previously predicted that the Fed would make two interest rate cuts in September and December of 2026. Now, the bank forecasts that the Fed will make 25 basis point interest rate cuts in January and March of 2027.
*This is not investment advice.
