Simply put
- The Federal Reserve has kept interest rates unchanged since last December.
- US President Donald Trump is pressuring the Fed to lower interest rates.
- Cryptocurrencies and other investments often gain from rate cuts that enhance financial liquidity.
The much-anticipated rate cut from the US Central Bank finally happened, with Federal funds decreasing by 0.25% on Wednesday. This came amid continual pressure from President Trump, who has expressed concerns that the economy is fragile and requires a boost.
Following the announcement, Bitcoin and other significant digital currencies remained nearly flat. Data from Coingecko suggests that Bitcoin, the largest cryptocurrency by market cap, was trading just over $116,000, reflecting a slight increase of 0.2%. It seems investors might be pricing in this expected decision.
Meanwhile, Ethereum, which holds the position of the second largest cryptocurrency, was trading flat at about $4,501 during the same period.
The Fed has adjusted interest rates to fall within the range of 4% to 4.25%, largely prompted by a downward revision from the Department of Labor. This revision indicated that the US job creation numbers were 911,000 lower than initially reported over the year leading up to March, amidst other shaky economic indicators. In their statement, the Fed acknowledged that “uncertainty about the economic outlook continues to rise.”
Concerns regarding the economy have seemingly overtaken fears of inflation, which has climbed to 2.9% yearly, consistently exceeding the Fed’s long-standing target of 2%. Notably, newly appointed Governor Stephen Milan opposed the rate cut decision, favoring a larger reduction of 0.50% instead.
The Federal Reserve is tasked with the dual objectives of keeping inflation in check while ensuring full employment.
Noelle Acheson, who writes the Crypto Is Macro Now Newsletter, noted in a message that the most significant aspect was not just the expected rate cuts but the updated economic forecasts, indicating that the central bank is increasingly worried about employment prospects.
According to Acheson, today’s surprise was more about these forecasts showing that the Federal Open Market Committee (FOMC) is uneasy about the employment outlook. They now predict that, by the end of the year, there could be two more cuts based on average expectations.
Acheson added that there were some known voices of dissent against these decisions, specifically from Michelle Bowman and Christopher Waller, who previously indicated that they felt a 25 basis point cut would be adequate.
This year, central bankers have refrained from making changes during five meetings, primarily due to inflation worries. As inflation began to slow down, banks opted for three cuts late last year, raising tension around potential further cuts ahead.
In an attempt to mitigate potential economic fallout, Trump has been vocally critical of the Fed, suggesting replacements for its governance with his preferred selections. Newly sworn-in Milan is stepping in following Adriana Kugler’s resignation, filling in a remaining four-month term.
On the same day, a federal appeals court blocked the dismissal of Governor Lisa Cook, a move believed to have presented a barrier to rate cuts. Many analysts suggest Cook is less constrained when it comes to monetary policy. Trump has also expressed strong disapproval towards Jerome Powell.
A popular measure of investor sentiment, the CME’s FedWatch tool, presently indicates a 96% likelihood of a rate cut soon.
Nonetheless, investor sentiment seems to be influenced by ongoing tensions raised by the White House and broader economic uncertainties, including Trump’s global trade strategies. Gold, often seen as a safe haven, surged to a record high of over $3,730 on Tuesday, reflecting an increase of more than 10% over the past month.
Interestingly, nearly nine in ten users across various markets anticipate Bitcoin, often likened to gold, will surpass $105,000 throughout September.
In her newsletter, Acheson pointed out a revised forecast that suggests year-end outcomes may impact the Fed’s approach following Wednesday’s announcements, potentially indicating shifts in market behavior.
“He might carefully sidestep the issue, but that could signal a lot. Alternatively, it might suggest that a cycle of reductions is beginning in the coming months. As always, every word is scrutinized for deviations from what’s anticipated, leading to much speculation,” she remarked.
Updated (September 17, 2025, 2:35pm): Added Acheson’s comments, Fed statements, and details regarding the vote.
