Macro interpretation: Early this morning, the Federal Reserve announced its final interest rate decision of the year, lowering the target range for the federal funds rate by 25 basis points to 4.25% -4.5%. This is the third interest rate cut after September and November, marking a delicate balance between the Federal Reserve’s response to slowing economic growth and inflationary pressures. This article will combine the latest online information to deeply interpret the Federal Reserve’s interest rate cut decision and the policy signals in Powell’s speech, and explore its impact on the cryptocurrency market.
The decision to cut interest rates and hawkish tendencies: The Fed’s 25 basis point rate cut this time is in line with market expectations, but the policy signals released during the meeting are full of complexity. Powell repeatedly mentioned the “more neutral setting” and the “Cautious” attitude towards further interest rate cuts at the press conference, indicating the hawkish tendency of the Federal Reserve in monetary policy.The latest interest rate chart shows that decision-makers expect to cut interest rates twice in 2025, while in September, the forecast for the number of interest rate cuts next year reached four at one point. This change reflects the Federal Reserve’s slowing pace in interest rate cuts and its cautious attitude towards the future economic outlook.
Among the 19 officials, a total of 14 expect to cut interest rates twice or less in 2025, while only five committee members expect to cut interest rates more than twice next year, further strengthening the hawkish stance of the Federal Reserve.Economic growth and inflation balance: Powell emphasized multiple times in his speech that the Federal Reserve is trying to find a balance between slowing economic growth and controlling inflation. He pointed out that taking too slow action may weaken economic activity in the labor market, while taking too fast action may harm the progress made by the Federal Reserve in controlling inflation. Therefore, the Federal Reserve will rely more on data-driven approaches to formulate monetary policy rather than predetermined paths.Despite facing challenges, Powell affirmed the performance of the US economy. He has repeatedly used phrases such as’ stable ‘,’ strong ‘, and’ resilient ‘to describe the current economic situation. However, he also admitted that real estate activity is weak, and although consumer spending remains elastic, the overall economic activity growth rate is slowing down. Meanwhile, although inflation is closer to the 2% target, it will still take one or two years to reach.
The uncertainty and impact of Trump’s policies: Powell also mentioned in his speech the policy uncertainty that the incoming Trump administration may bring. Trump promised to implement aggressive tariff plans during the campaign, which economists generally believe could lead to another rise in US inflation. Powell stated that some members of the Federal Open Market Committee have begun preliminary assessments of the potential impact of Trump’s policies, but it is still too early to draw conclusions on how they will affect inflation.The policy uncertainty of the Trump administration has brought additional challenges to the market. On the one hand, tax cuts and tariff policies may stimulate economic growth, but on the other hand, they may also lead to increased inflation, forcing the Federal Reserve to change the pace of interest rate cuts. This uncertainty makes the market more cautious about the future policy direction of the Federal Reserve.
The impact on the cryptocurrency market: The Federal Reserve’s interest rate cut and Powell’s speech have had a significant impact on the cryptocurrency market. The decision to cut interest rates is in line with market expectations, but the hawkish rhetoric and the upward adjustment of inflation expectations have caused market volatility. Major encrypted assets such as Bitcoin, Ethereum, and various altcoins have experienced significant price corrections.After announcing the interest rate cut, the price of Bitcoin quickly fell by about 5.6%, briefly falling below $99000. Ethereum’s performance has been even weaker, with a drop of nearly 7%. Other altcoins such as Solana and Dogecoin have also performed poorly, with declines of over 7% and 8% respectively. The volatility of the cryptocurrency market has led to a large number of traders liquidating their positions, indicating the market’s unease.
The sharp decline in mainstream cryptocurrency assets such as Bitcoin reflects market concerns about future inflation and the Federal Reserve’s response to policy uncertainty. However, in the long run, the cryptocurrency market still has enormous potential. This pullback has created potential for future rebounds.The Fed’s decision to cut interest rates and Powell’s speech have released many policy signals, demonstrating the Fed’s delicate balance between economic growth and inflation control. The hawkish tendency and uncertainty of Trump’s policies have brought additional challenges to the market, making it more cautious about the future policy direction of the Federal Reserve. For the cryptocurrency market, the Federal Reserve’s interest rate cut decision and policy signals have caused significant market volatility. However, in the long run, the cryptocurrency market still has enormous potential for development. Investors should closely monitor the policy direction of the Federal Reserve and the dynamic changes in the cryptocurrency market in order to adjust their investment strategies in a timely manner and seize market opportunities.
BTC analysis:Yesterday’s article focused on interpreting the “hawkish interest rate cuts by the Federal Reserve” and Powell’s hawkish stance. BTC also fell to the short-term support level of around $99200 according to my analysis on Monday and Tuesday. This is also near the first trend line support, and the next trend line support is around $96800.At 3am today, the Federal Reserve cut interest rates by 25 basis points in line with expectations. But the important thing is that the wording of the meeting statement has been adjusted, reflecting the changes in the pace and magnitude of FOMC’s consideration of the implementation of subsequent policies. There have also been differences in vote types, with some members opposing a rate cut in December. The economic forecast clearly reflects concerns about inflation risks, and the Federal Reserve’s risk balance is clearly shifting towards inflation again. The dot plot only implies two interest rate cuts next year, showing an absolute hawkish tendency. Powell is cautious about further interest rate cuts and has a hawkish stance.After the meeting, the US dollar surged, while the US stock market, gold, and Bitcoin all fell sharply.The hawkish statements and statements have weakened expectations for the future path and level of interest rate cuts, that is, the magnitude and frequency of interest rate cuts have decreased, and they may continue to remain at a higher level in the future. This is also the core logic of this round of decline, and Powell’s statements about Bitcoin reserves are only a small booster. The significant decline in the three major US stock indexes also shows that the market’s core logic is still a reaction to the strengthening of the US dollar.
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