The Federal Reserve’s increasingly hawkish monetary policy trajectory, marked by anticipated reductions in 2025 interest rate cuts, may heighten Bitcoin market volatility as investors confront diminished prospects for accommodative policy shifts.
John Velis, Macro Strategist at BNY Mellon, anticipates no changes to benchmark rates during the Fed’s imminent policy meeting. Market focus centers on the forthcoming update to the Summary of Economic Projections (SEP), widely expected to signal significantly fewer rate cuts for 2025 than previously forecast. This outlook clashes with earlier market expectations of nearly two rate reductions for the year.
Persistent inflation concerns continue to drive the central bank’s cautionary stance. Policymakers remain reluctant to pursue aggressive monetary easing amid ongoing economic uncertainty.
Velis noted that during the prior year, the limited number of remaining Federal Reserve meetings made substantial policy shifts toward easing unlikely before year-end. With both historical precedent and current projections pointing toward sustained restrictive policy, the recalibration toward fewer expected cuts heightens the potential for directional volatility across risk assets.
Such monetary tightening expectations may particularly impact Bitcoin, introducing near-term market turbulence as traders adjust positions to reflect higher-for-longer interest rates.