Summary

  • The Federal Reserve maintained its benchmark interest rate at 3.5%–3.75% on Wednesday.
  • In the wake of the announcement, Bitcoin and Ethereum both experienced slight declines.
  • No new rate projections were provided, with the next update set for September.

The Federal Reserve decided to keep interest rates steady at 3.5%–3.75% on Wednesday, aligning with widespread market expectations. This decision led to a subdued reaction in the cryptocurrency markets, even as stock prices fell due to a mix of hawkish dissent and geopolitical concerns.

Following the Fed's announcement, Bitcoin's price dropped approximately 1%, settling at around $63,890, while Ethereum also fell by about 1%, now trading just above $1,900.

This marks the fifth consecutive time the committee has opted to hold rates steady since a 25-basis-point cut in December 2025, a decision made by Jerome Powell before Kevin Warsh, who was appointed by Trump, took over. Since that time, interest rates have remained unchanged. Warsh has also committed to providing less "forward guidance" compared to his predecessors, resulting in fewer indications for the markets regarding future rate movements.

Wednesday's decision was made without a Summary of Economic Projections, which typically includes the Fed's dot plot indicating members' expectations for future rates. The next update will be released in September. The committee did mention that the economy is "expanding at a solid pace," but inflation remains above the 2% target, partly due to rising energy prices linked to the situation in the Middle East.

This inflation aspect is significant for cryptocurrency markets. Nearly half of the members of the Federal Open Market Committee (FOMC) indicated during the June meeting that they would support a rate increase before the year ends. Recently, oil has been trading above $100 a barrel, maintaining pressure on prices. Consequently, the possibility of a rate hike in September is very much alive, and market participants are aware of this.

The Federal Reserve typically adjusts interest rates based on economic indicators, such as inflation, employment, and growth trends. An increase in rates makes borrowing more expensive—affecting mortgages, business loans, and credit card debt—which tends to slow consumer spending and, theoretically, cool inflation. Conversely, when rates decrease, cheaper borrowing generally encourages investment and risk-taking. Historically, lower rates have favored assets like cryptocurrencies, which attract more investment when safer options yield lower returns. The mere prospect of a rate hike often exerts downward pressure on prices.

Three regional Fed bank presidents—Beth Hammack from Cleveland, Neel Kashkari from Minneapolis, and Lorie Logan from Dallas—voted against the decision to hold rates steady, advocating instead for an immediate 25-basis-point increase, marking the most hawkish dissent during Warsh's tenure as chair.

Geopolitical tensions also affected the markets: Oil prices surged nearly $4 to $83 prior to the decision being announced, further intensifying inflation concerns that supported the hawkish stance. This surge followed retaliatory strikes by the U.S. and Saudi Arabia against Iranian-backed forces in Iraq, resulting in at least 20 fatalities.

The next FOMC meeting is scheduled for September 16, 2026, during which the committee will release updated economic forecasts and a new dot plot.