Federal Reserve Cuts Rates as U.S. Economy Slows, Bitcoin Reacts

The Federal Reserve has shifted back to monetary easing after ten months of holding steady, cutting its benchmark interest rate by 25 basis points to 4%-4.25%, the lowest since December 2022. Fed Chair Jerome Powell described the move as a “risk management cut,” signaling caution while acknowledging slowing growth and a weaker job market.

The decision follows August data showing just 22,000 new jobs and unemployment climbing to 4.3%, the highest since 2021. Revisions also revealed fewer jobs created earlier in the year. Powell noted that weaker labor trends stem partly from immigration changes but emphasized that the Fed would not rush into deeper cuts despite mounting political pressure from President Trump.

Markets initially reacted positively, with Bitcoin briefly rising 1% before sliding to around $115,092. U.S. stock indexes and gold mirrored that volatility, spiking before falling sharply. Analysts highlighted that while the 25bps cut was expected, the Fed’s updated dot plot indicates another 50bps of cuts could follow, reflecting a dovish tilt.

Crypto strategists see the Fed’s stance as bullish for Bitcoin. According to 21Shares’ Matt Mena, the market now faces a “repricing risk,” with dovish signals potentially setting up Bitcoin for new highs by year-end. Galaxy’s Chris Rhine echoed that sentiment, suggesting Powell’s successor may push for faster easing.

The Fed’s outlook remains split, with a slight majority of Federal Open Market Committee participants anticipating at least two more cuts this year, while seven prefer keeping rates steady. The path forward hinges on labor data, inflation trends, and political dynamics. For crypto and risk assets, the central bank’s easing cycle may prove a pivotal driver of market sentiment.