Rate Decision: 25 bps Cut with Notable Dissent
The Federal Reserve cut the federal funds target range by 25 basis points to 3.50%–3.75% today, the third rate cut of the year and the first since October. The central bank stated that the move is intended to support maximum employment and return inflation to 2%. Economic activity is expanding at a moderate pace, job gains have slowed, and inflation remains somewhat elevated, the Fed said.
Most officials voted for the cut, but three dissented—one preferred a larger cut and two preferred no change. Policymakers view the decision as reflecting easing inflation pressures and a desire to sustain economic activity as growth moderates. The Fed had held rates steady for several meetings after its October cut.
Economic Forecasts and Market Divergence: Treasury Yields Rise Despite Cuts
Fed officials left their rate forecasts unchanged, signaling modest 25-basis-point cuts in 2026 and 2027. The updated projections show 2026 unemployment at 4.4%, core PCE inflation at 2.4%, and GDP growth at 2.3%. These figures indicate policymakers expect the economy to remain resilient.
Notably, the 10-year Treasury yield has climbed this month even as expectations for a rate cut grew, signaling investor concern that easing policy now could reignite inflation and force rates higher later. Internal divisions within the Fed add to this tension, as Chair Jerome Powell likely heads into his final meeting before President Trump names a successor, ending a tenure defined by consensus-building amid unusual discord.
Bitcoin and Crypto Market Reaction: Historical Volatility Repeats
Lower interest rates reduce borrowing costs for households and businesses, encouraging spending, investment, and risk-taking across financial markets. However, crypto markets have historically responded more erratically. During the last rate cut in October, Bitcoin slipped from around $116,000 to lows of $111,000 that week, and has since plunged to $80,000. Currently, Bitcoin is trading near $92,500 with significant volatility.
Bitcoin's response to rate cuts has varied in the past: sharp volatility during the Fed's emergency easing in 2020, and a more muted reaction to the September 2025 cut. Importantly, the Fed's quantitative tightening (QT) program is nearing its end—Chair Powell indicated that balance-sheet runoff should stop by December. QT has been draining liquidity by allowing bonds to mature without reinvestment, pushing yields higher and tightening financial conditions. The combination of rate cuts and QT termination creates a complex liquidity backdrop for crypto markets.