The Federal Reserve executes its third consecutive rate cut in 2025

Source: CritpoTendencia Original Title: The Federal Reserve Executes Its Third Consecutive Rate Cut in 2025 Original Link: As widely anticipated, this Wednesday the Federal Reserve announced a new 25 basis point cut to the interest rate. This is the third consecutive reduction in borrowing costs in 2025. However, this should not be taken as an indication that 2026 will be characterized by monetary policy easing in the United States.

This latest meeting of the Federal Open Market Committee (FOMC) was held between Tuesday and Wednesday. During the gathering, members of this Fed body analyzed the latest data on the U.S. economy, particularly inflation and the state of the labor market. In the end, the decision to cut was approved with 9 votes in favor and 3 against.

Of the 3 dissenting votes, the presidents of the Chicago and Kansas City Fed, Austan Goolsbee and Jeff Schmid, called for keeping the rate unchanged. Meanwhile, the central bank governor, Stephen Miran, advocated for a 50 basis point cut.

As a result, the rate remains in the range of 3.5% to 3.75%. Despite these cuts, borrowing costs stay at a high level, continuing to slow down the momentum of financial markets and cryptocurrencies.

During the traditional press conference following the FOMC meeting, Fed Chair Jerome Powell provided a preliminary summary of the gathering. The official highlighted that the economy remains stable, while the labor market shows ongoing signs of cooling.

The interest rate and its possible impact on Bitcoin price

During his statements, Powell emphasized several key points about this Wednesday’s rate cut. First, he noted that the labor market is gradually cooling, while inflation remains somewhat elevated.

He also highlighted that divergence within the FOMC reflects the complexity of balancing contradictory risks, but that action is taken prudently based on incoming economic data.

He insisted that economic conditions have not fundamentally changed since October. “There is no risk-free path for policy as we navigate this tension between our employment and inflation goals,” he emphasized.

Considering that this December meeting is the last of 2025, it should have a significant impact on Bitcoin’s price. The next FOMC meeting will be at the end of January 2026, which implies a rather extended period. During this time, other catalysts could influence the digital asset market.

Anyway, the reaction of Bitcoin after the Fed’s decision and Powell’s statements so far has been almost imperceptible; the official tried to keep a calm tone. Up to the time of writing, market investors are expected to process the official’s words well. Meanwhile, stocks reacted upwards during the press conference.

Possible monetary policy scenarios for 2026

The monetary policy scenario for 2026 is the biggest unknown left by this year’s last FOMC meeting. What increases uncertainty is that there are strong reasons for the Federal Reserve to take one path or another—either rate cuts or maintaining rates unchanged for longer. Powell, for his part, dismissed any possibility of increasing rates in 2026.

For example, in terms of inflation, the PCE index was at 2.8% in September. While this measure improves expectations, the index remains well above the Fed’s 2% target.

According to former Cleveland Fed President Loretta Mester, inflation is resisting falling to 2%. This requires a somewhat restrictive policy to exert downward pressure on inflation.

The labor market also shows clear signs of cooling, maintaining pressure on the Fed to lower interest rates. As can be seen, the scenario remains one of the most complicated, and the Fed must decide what is more important: reducing inflation or avoiding a recession.

To increase uncertainty, the Fed also published the latest economic projections (SEP) for the year. These remained almost identical to September’s projections and only advocated for a rate cut in 2026.

GDP projections for 2025 stand at 1.7% in 2025 and 2.3% in 2026. The latter projection is stronger than in September. For 2025, unemployment is projected at 4.5% with a downward trend. PCE inflation is projected at 2.9% for this year and 2.4% for 2026.

A new Fed president in 2026

A crucial aspect for 2026 is that Jerome Powell’s term as Fed chair ends in May. Essentially, the pressure for rate cuts increases dramatically, especially if Powell’s replacement is Kevin Hassett.

He is an official who favors monetary policy easing and is currently the likely choice for the position.

Regardless of who is nominated, they will necessarily adopt a rate-cutting stance. This was made clear recently in an interview, where it was emphasized that the next Fed chief must reduce the rate immediately.