Crypto and other assets typically benefit from rate cuts that increase financial liquidity.
The U.S. central bank, as widely expected, cut the federal funds rate by 0.25% Wednesday, amid recent signs that the economy was faltering and needed a boost — and under relentless pressure from President Donald Trump.
Bitcoin and other major digital assets traded largely flat in the immediate aftermath. The largest cryptocurrency by market capitalization was recently changing hands just above $116,000, up 0.2% over the past hour hours, according to crypto markets data provider CoinGecko. BTC rallied in recent days with investors possibly pricing in the anticipated decision.
Ethereum, the second-largest cryptocurrency by market value, was trading at $4,501, flat over the same period.
The Fed slashed the interest rate to a range between 4% and 4.25% after a downward revision in a Department of Labor report showing that the U.S had created 911,000 fewer jobs than initially reported for a year-long period ending in March, and other concerning economic signs. “Uncertainty about the economic outlook remains elevated,” the Fed noted in a statement.
Those concerns outweighed the threat of inflation, which has risen to 2.9% on an annual basis, stubbornly above the bank’s longstanding 2% goal. Newly sworn-in governor Stephen Miran, a White House appointee, dissented from the decision, voting for a .50% rate cut.
The Fed has a dual mission to keep inflation low and ensure full employment.
In Telegram message to Decrypt, Noelle Acheson, the author of the Crypto Is Macro Now newsletter, wrote that the big deal wasn’t the expected rate cut but updated economic forecasts from Fed officials, showing that central bankers are “getting more nervous about the employment outlook.”
The big deal today was not the rate cut (widely expected), it was the updated economic projections from Fed officials – these showed that the FOMC is getting more nervous about the employment outlook, with the average expectation of 2025 cuts now pointing to two more before year end.”
Acheson added that the one dissent was notable and that Michelle Bowman and Christopher Waller, who dissented from the Fed’s August decision to hold rates in place “thought 25bp was enough.”
Central bankers had kept rates unmoved over five meetings this year over inflation concerns, with Fed Chair Jerome Powell vowing after these decisions to remain data-driven in focus. The bank dropped rates a percentage point in three late 2024 rate cuts as prices slackened, and raised expectations for additional cuts this year.
Fearful that his administration will be saddled with an economic cratering, Trump has hotly criticized the bank for not following through and looked to replace Fed governors with his own more dovish selections. On Tuesday, Miran was sworn in to serve out the remaining four months of a term left open when Adriana Kugler resigned in August.
The same day, a federal appeals court blocked Trump’s firing of Fed governor Lisa Cook, whom he considered — possibly wrongly — of being an obstacle to a rate cut. By numerous accounts, Cook is considered less restrictive about monetary policy. Trump has also hotly criticized Powell.
The CME’s FedWatch tool, the widely watched measure of investor sentiment, forecast a 96% probability of a rate reduction in the days leading up to the decision.
Still, investors have been unbalanced by the White House-Fed feud and ongoing macroeconomic uncertainties, including Trump’s global trade war. Gold, the traditional safe haven asset, rose to a record high on Tuesday above $3,730. It is up more than 10% over the past month.
And a Myriad market found that nearly nine in 10 users expect the price of Bitcoin, which is often likened to gold, to remain above $105,000 throughout September.
(Disclosure: Myriad is a prediction market and engagement platform developed by Dastan, parent company of an editorially independent Decrypt.)
In her newsletter Tuesday, Acheson noted that updated projections showing end-of-year gains for unemployment and inflation and Powell’s comments about the Fed’s approach following Wednesday’s announcement could “encourage or spook” markets.
“He might studiously avoid saying anything at all, but that itself would be a signal. Or, he could hint that a new easing cycle has begun, with consecutive cuts in coming months. Or, he could reiterate the need to wait for more data on inflation and employment,” Acheson wrote. “As usual, his words will be parsed carefully for deviations from the expected tropes, and as usual, too much will be read into them.”
