Fed Interest Rate Decision: Impact on Crypto Market Amidst Tariff and Middle East War Uncertainties

The Wall Street Journal's chief economics correspondent, Nick Timiraos, has expressed his belief that the Federal Reserve is likely to cut interest rates this week due to recent improvements in inflation. However, the risk of tariffs on prices and the latest escalations in the Middle East war could still pose a challenge for the Fed.

President Donald Trump's tariff policy, particularly targeted against China, had a significant impact on the crypto market in the first few weeks of 2025. The total crypto market cap dropped from $2.7 trillion on April 2, when Trump hiked tariffs, to $2.4 trillion on April 9, when he paused tariffs for all except China for 90 days.

The Fed is holding its FOMC meeting on June 17-18 to make a decision on rate cuts, but Timiraos wrote that officials will continue to adopt a wait-and-see policy. Despite the May CPI coming in at 2.4%, which is softer than expected, it is still much higher than the Fed's target of 2%. The central bank must consider not only the implications of Trump's tariff policy but also the latest developments in the Middle East war.

In addition, Fed Chair Jerome Powell must also face the aggressive posturing of President Trump, who has been warning Powell to slash rates. The potential rate cut by the Fed has significant implications for the crypto market, which is no longer as insulated from traditional markets as it once was. In fact, it is known to react sharply to the Fed's moves of late.

If the bank decides to slash interest rates at least once later this year, it is expected that the crypto market would witness a substantial fund inflow. At press time, the total crypto market cap stood at $3.28 trillion, and Bitcoin was trading at $105,550.20, down 1.28% from the previous day.

This story was originally reported by TheStreet on June 17, 2025, where it first appeared.