The Federal Reserve‘s (Fed) first meeting of 2025 is set to conclude on Wednesday, with no changes expected to the current interest rate range of 4.25%-4.5%. While the decision itself may not surprise markets, Chairman Jerome Powell‘s comments on critical issues during the post-meeting press conference could impact the broader economy and risk assets, including cryptocurrencies like Bitcoin (BTC).

Steady Rates but Hawkish Guidance

The Fed implemented a 25-basis-point rate cut in December 2024 but signaled a cautious approach for 2025, prioritising inflation control. The unchanged rate decision at this meeting aligns with prior communication and market expectations, reducing the likelihood of significant market movement.

However, Powell’s reiteration of hawkish forward guidance could weigh on risk assets, especially if the Fed emphasises maintaining higher rates for an extended period. Bitcoin and other cryptocurrencies, often inversely correlated with traditional financial tightening, may face short-term headwinds.

Labour Market Pressures and Deportations

The U.S. labour market remains tight, and mass deportations under President Donald Trump‘s administration are expected to intensify this trend. Removing up to one million workers from the economy could constrain labour supply further, adding inflationary pressures.

If Powell acknowledges this dynamic and its potential inflationary impact, it could lead to reduced expectations for rate cuts. Such a stance might dampen investor enthusiasm for riskier assets, including BTC, which thrives on looser monetary policy.

Debt Ceiling and Liquidity Concerns

The U.S. recently hit its $36 trillion debt ceiling, prompting the Treasury to implement extraordinary measures to maintain government operations. One such measure is drawing down the Treasury General Account (TGA), which could inject liquidity into the financial system despite the Fed’s ongoing quantitative tightening.

While increased liquidity typically benefits risk assets, Powell may downplay this effect to maintain a hawkish tone. Crypto markets could see limited upside if liquidity-driven optimism is tempered by caution from the Fed.

Shelter Inflation Trends

Shelter inflation, a key component of the Consumer Price Index (CPI), is showing signs of moderation. Leading indicators, such as the Labour Department’s “all tenant rent” index, suggest a slowdown in rent growth.

A soft Q4 CPI print in Aus. Feb RBA cut now well and truly a live prospect.

— Benjamin Picton (@BenPicton1) January 29, 2025

If Powell acknowledges this disinflationary trend, it could support market optimism. Bitcoin and other cryptocurrencies might benefit as investors anticipate a less aggressive Fed stance on inflation control. However, a cautious interpretation by Powell could temper the impact on markets.

While the Fed’s meeting is unlikely to be a game-changer, Powell’s commentary will offer critical cues for the crypto market. A focus on inflationary risks and labour market tightness may exert downward pressure on BTC. Conversely, recognition of easing shelter inflation or liquidity boosts from the TGA could provide a tailwind.