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The Federal Reserve cuts rates by 25 basis points, lowering the federal funds target range to 4.00%–4.25%. The decision, announced Wednesday after the Federal Open Market Committee (FOMC) meeting, marks the central bank’s first policy easing of 2025.
Fed Chair Jerome Powell said the committee had waited until September to act in order to assess the trajectory of the economy.
“We felt it was right to take the time we did to better evaluate the impacts of policy,” — Powell, during a press conference.
The rate adjustment comes amid signs of labor market deterioration. Unemployment rose to 4.3% in August, up from 4.2% the previous month. Job creation slowed sharply, with just 22,000 positions added in August, while June’s figures were revised to show a loss of 13,000 jobs.
Newly appointed Fed governor Stephen Miran dissented, arguing for a deeper 50-basis-point cut. His vote underscores the debate within the Fed about how aggressively to support slowing growth.
While the Federal Reserve cuts rates now, FOMC participants remain divided over the path for 2025. Powell noted that 10 of the 19 officials support two or more additional reductions this year, while nine prefer fewer.
The Fed’s median “dot plot” projection points to two more cuts in 2025, bringing rates to about 3.6% by year-end. Forecasts extend further: 3.4% in 2026 and 3.1% in 2027. But Powell cautioned that such estimates should be seen as probabilities rather than promises.
“The economy is sending mixed signals,” — Powell, Federal Reserve Chair. Inflation remains above target, with core prices up 3.1% in August, unchanged from July. GDP growth was revised upward to 1.6%, but the Fed now projects unemployment to rise to 4.5% in coming months.
Miran’s dissent highlights tensions between addressing employment concerns and maintaining credibility on inflation. The Federal Reserve cuts rates in part to support jobs, but officials remain wary of easing too quickly while inflation lingers above 2%.
For investors, the fact that the Federal Reserve cuts rates could shift capital flows. Lower yields reduce the appeal of money market funds, where an estimated $7.2–$7.5 trillion currently sits.
“Declining yields will likely push investors toward equities and alternative assets, including crypto,” — Matt Mena, 21Shares.
Bitcoin traded near $117,305 after the announcement, approaching its all-time high of $124,000. Market optimism has grown around expectations of further easing. Data from Polymarket shows 62% of traders now expect Bitcoin to surpass $130,000 by 2025.
If the Federal Reserve cuts rates again later this year, analysts suggest risk assets could see renewed inflows, particularly in digital currencies, which have historically benefited from looser monetary conditions.
The Federal Reserve cuts rates at a delicate moment for the U.S. economy. Policymakers face pressure to bolster employment while ensuring inflation does not become entrenched above the 2% target.
Powell reiterated there is no “predetermined path” for policy in 2025. Instead, the committee will evaluate data on a meeting-by-meeting basis, weighing labor market conditions against inflationary pressures.
Miran’s call for a deeper cut underscores the difficulty of striking this balance. For now, the Federal Reserve cuts rates incrementally, signaling caution while leaving open the possibility of further action.
The decision reflects the first easing move since December 2024, setting the stage for what could be a pivotal year in monetary policy and financial markets. For crypto investors and traditional market participants alike, the pace and scale of future cuts will remain a central theme through the remainder of 2025.
