Anna Paulson, President and CEO of the Federal Reserve Bank of Philadelphia, told attendees at the Atlanta Fed’s Financial Markets Conference on May 19 that the current federal funds rate of 3.5% to 3.75% is “in a good place.” She also made clear she’s not committing to any particular direction on rates, preferring to let inflation data do the talking.

Paulson’s keynote emphasized a data-dependent approach. She wants to see clear trends in underlying inflation and labor market dynamics before supporting any move on rates. She also explicitly stated that markets should be pricing in both an extended hold and the possibility of further tightening.

Her longer-run estimate for the neutral rate, sometimes called R-star, sits at approximately 3.1%. That’s roughly in line with the Summary of Economic Projections median. She noted that productivity gains, particularly from artificial intelligence, could push that neutral rate higher over time.

Back in January 2026, Paulson had implied that modest rate cuts might be appropriate later in the year under an optimistic economic scenario. The fact that we’re now in late May with rates unchanged and her tone shifting toward “keep an open mind” suggests that optimistic scenario hasn’t fully materialized.

The crypto pressure point

Higher interest rates reduce overall market liquidity and increase the opportunity cost of holding non-yielding assets like Bitcoin. When you can earn 3.5% to 3.75% risk-free from government bonds, the calculus for parking capital in volatile digital assets changes meaningfully.

Historical patterns bear this out. Extended periods of elevated rates have consistently applied downward pressure on Bitcoin and the broader crypto market.

What investors should watch heading into June

The June FOMC meeting is shaping up to be one of the more consequential ones this year, not because a rate change is expected, but because the accompanying dot plot and press conference will reveal how many Fed officials share Paulson’s wait-and-see approach versus those ready to move in either direction.

If core PCE continues to run above the Fed’s 2% target, the case for holding rates steady, or even hiking, strengthens considerably. If it shows meaningful deceleration, the January optimism about modest cuts could resurface.