After ten months of “waiting,” the US Federal Reserve (Fed) proceeded with the expected cut in its benchmark interest rate by a quarter of a percentage point to a range of 4-4.25 percent. This is the lowest level since December 2022. Fed Chairman Jerome Powell described the move as a “precautionary measure in risk management” and stressed that the goal is to respond to the slowing economy and cooling labor market.
According to Powell, the current slowdown in employment is partly a result of changes in immigration. At the same time, however, he rejected the need for more aggressive intervention, and there was no broader support for a larger rate cut within the committee. According to him, the Fed does not intend to rush into further action.
The decision came after a series of weak macroeconomic data – the August report from the US Bureau of Labor Statistics (BLS) showed an increase of only 22,000 new jobs, while unemployment rose to 4.3 percent, the highest since 2021. In addition, revisions to previous months revealed that job growth was lower than originally reported. At the same time, the Fed faces political pressure from President Donald Trump, who has long criticized the central bank for its slow pace of rate cuts. However, Powell stressed that the Fed is “firmly committed to defending its independence.”
Market reaction: Bitcoin on a roller coaster
Immediately after the announcement, Bitcoin gained about one percent, but shortly thereafter weakened and fell to $115,092—about 1.5 percent below the level before the announcement. In recent hours, it has been rising slightly again. US stock indices and gold have seen the same development, with short-term gains quickly giving way to declines.
A look at the so-called dot plot – a graph showing estimates of future rate developments by individual members of the FOMC (Federal Open Market Committee) – shows that opinions on the rest of the year are divided. A narrow majority of members expect two more rate cuts before the end of the year. This could mean further support for riskier assets, including cryptocurrencies.
For investors, this is a signal that this fall could be a turning point for Bitcoin – not only because of the rate cuts themselves, but also because of the growing chance of further monetary stimulus.
