Key Insights:
The United States Federal Reserve held its second policy rate meeting for 2025.
The interest rate was kept constant at an effective Federal Funds rate to a window of 4% to 4.25%.
The reasons behind not cutting interest rates could be the change in good jobs data which as per the SEC is improving.
To give effect to the interest rate decision, the US Fed will conduct open market operations which includes buying and selling of Treasury Bonds.
The Federal Reserve meeting has concluded that it will keep the interest rates at current level in an attempt to control the inflation in the country. The effective Federal Funds rate remains unchanged at a window of 4.25% to 4.5%. Now all eyes are on guidance which would be available later this month.
We at Voice of Crypto believed that there was a likelihood of a rate cut only around May 2025 as the inflation cools down. However, the risk of a no rate cut in May 2025 would lead to a recession in the US and this might also spill over around the world.
The US Federal Reserve has the mandate to control inflation in the US but it is also the nodal agency responsible for the US Monetary Policy. The latter being the primary responsibility of the US Fed forces it to create and take care of the avenues of economic growth which would be derailed if a recession were to hit the markets.
The 11-member US Federal Open Market Committee (FOMC) decides the interest rates based on several factors mentioned below.
Inflation plays a key role in the decision because a high inflation above 2% is against the mandate of the US Fed while an inflation below 0% risks pushing the economy into recession.
In the last four years, the US inflation has been at a very high level because of COVID stimulus checks that injected roughly $16 trillion in the US economy.
Last 20 Years US Inflation Data Feb 2005 to Feb 2025
Since 2023, the US Fed has been raising interest rates which has initiated a short recession in the stock and crypto markets. However, by mid 2024 the recession was over as the US Fed cut 1% interest rate in three batches of 0.5% (September), 0.25% (September) and 0.25% (November).
In the last two meetings, 28 -29Jan and18-19 March the rates were kept constant.
US Economic activity which is shown by GDP data, manufacturing index data, purchasing managers index data, and US Agricultural Output data, along with several other points are considered to check whether the US is in a recession.
If yes, the FOMC will cut down on the interest rates to make debt cheaper and allow easy flow of liquidity in the markets, lifting the growth rate up.
Jobs data plays a critical role in setting up the stage for any US FOMC meeting. Low growth or a fall in US Non-Farm Payroll (jobs) data means that there is likelihood of a recession in the markets.
In the last few months, the US Non-Farm Payroll Data has been increasing but in February 2025 it saw a marginal dip. It rose 151k as opposed to market expectations of 160k. This is the reason for keeping rates flat.
The decision on interest rates do not rely on the will of the US Federal Reserve Chairman (currently Jerome Powell) but is based on the decisions made by the US Federal Open Market Committee led by a committee of 11 members. This committee is composed on a Chairman, Vice Chairman (NY Fed), five other Governors and four US Federal Reserve Banks (chosen out of 11, except NY Fed).
Federal Reserve Board of Governors Chairman – Jerome Powell
Vice Chairman – President of the Federal Reserve Bank of New York – John C. Williams
Board of Governors
Michael S Barr
Michelle W Bowman
Lisa D Cook
Phillip N Jefferson
Adriana D Kugler
President of Federal Reserve Bank (currently Boston) – Susan M Collins
President of Federal Reserve Bank (currently Chicago) – Austin D Goolsbee
President of Federal Reserve Bank (currently St Louis) – Alberto G Musalem
President of Federal Reserve Bank (currently Kansas City) – Jeffery R Schmid
These experts analyze various economic data points to make a decision. These data points are:
Inflation Rate
Prevailing Interest Rate (Federal Funds Rate)
US Job Growth Data
US Industrial Output Data
US GDP Data and Estimates
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.