Fed seen holding rates… “All eyes on Powell; Bitcoin volatility at an inflection point”

The US Federal Reserve (Fed) is widely expected to keep rates unchanged this week, but depending on the tone of Chair Jerome Powell’s remarks on the future policy path, volatility could increase across both traditional financial markets and crypto assets.

According to the CME FedWatch Tool cited by CoinDesk on the 26th (local time), the probability that the Fed will keep the benchmark rate in the 3.5–3.75% range stands at 96%. Powell previously said in a speech last December that additional rate cuts could be pushed back until after 2026, while Neel Kashkari, president of the Federal Reserve Bank of Minneapolis and a voting member of this year’s Federal Open Market Committee (FOMC), also remarked that “it is still too early to talk about rate cuts.”

The key question, however, is whether this hold is a “hawkish pause” or a “dovish pause.” A hawkish message would underscore inflation risks and could weigh on risk assets. Conversely, if the hold is framed as temporary and hints at the possibility of resuming cuts within the next few months, it could be supportive for Bitcoin (BTC) and equities. Morgan Stanley expects the Fed to keep the existing wording in its policy statement about “considering the extent and timing of additional adjustments,” leaving the door open to easing.

CoinDesk also noted that Powell is likely to face questions at the press conference about President Donald Trump’s policy to “ease housing cost burdens.” Trump recently mentioned large-scale purchases of mortgage-backed securities (MBS) and measures to restrict institutional investors from buying single-family homes. ING said “financial conditions are already sufficiently loose, making it difficult to justify the need for additional rate cuts,” adding that “if Powell’s comments lead to a stronger dollar, it could be a short-term headwind for Bitcoin.”

Some assessments also suggest that certain policies could stoke inflation pressure in the near term. Allianz Investment Management pointed out that a $200 billion MBS purchase could pull forward housing demand and push prices higher. Meanwhile, while the Trump administration’s tariff policy has largely been priced in by markets, there remains the possibility that higher import prices could feed through to consumer inflation this year.

Ultimately, the core of this FOMC is not the rate level but Powell’s words. With the dollar, equities and Bitcoin all poised to react sensitively depending on how he frames policy direction for the coming months, tensions with the White House, and his assessment of volatility in global bond markets, markets are effectively treating this press conference as a directional event.