Fed Cuts Rates; Powell Signals Cooling Labor Market and Persistent Inflation Risks
The Federal Reserve reduced interest rates, with two members dissenting and seven indicating they opposed further cuts next year. Chair Jerome Powell emphasized a gradually cooling labor market, rising unemployment and slower employment growth, while consumer spending and business fixed investment remain resilient and housing stays weak. Powell noted that recent decisions have helped stabilise the job market and ease inflation pressures but warned inflation risks remain slightly elevated and long-term expectations roughly align with the 2% target. He supported purchasing short-term Treasuries to control policy rates and said there is no risk-free policy path. Market watchers view the mixed Fed statements and Powell’s remarks as key to gauging future monetary policy direction.
Neutral
Rate cuts typically ease financial conditions, which can be supportive for risk assets including cryptocurrencies. However, the Fed signalled caution: seven members opposed further cuts next year and Powell highlighted persistent inflation risks and a cooling labor market. That mixed messaging reduces the likelihood of a clear, sustained liquidity-driven rally. Short-term: market volatility may increase as traders react to Powell’s tone and interpret the balance between stabilisation and inflation risks. Expect choppy price action and risk-on spikes when liquidity improves, but also pullbacks when inflation concerns resurface. Long-term: if the Fed holds rates steady after this cut and inflation trends toward 2%, crypto could see a gradual tailwind from lower real rates; conversely, renewed inflation or hawkish pivots would be bearish. Similar past events: partial cuts with cautious guidance have produced short-lived rallies (e.g., post-cut pullbacks in 2019–2020) rather than sustained bull runs. Overall, the mixed signals point to a neutral classification for crypto markets.