Stable Bitcoin Amidst Fed's First Interest Rate Reduction Since December
The Federal Reserve has made a 0.25% rate cut on Wednesday, bringing the federal funds rate to a range between 4% and 4.25%. This decision comes in response to recent signs that the economy was faltering, with unemployment concerns outweighing the threat of inflation, which has risen to 2.9% on an annual basis.
The rate cut was not unanimous, with Fed governors Michelle Bowman and Christopher Waller voting against the decision. They thought a 0.25% rate cut was enough, while Stephen Miran, a White House appointee, dissented from the decision, voting for a 0.50% rate cut.
The decision to lower mortgage rates has been a topic of debate for some time, with President Donald Trump being critical of the Fed for not following through on rate cuts. Trump has looked to replace Fed governors with his own more dovish selections.
Stephen Miran, who took office as Fed Governor in September 2025, was nominated by President Trump and was sworn in to serve out the remaining four months of a term left open when Adriana Kugler resigned in August.
The Fed's updated economic projections, as noted by Noelle Acheson, the author of the Crypto Is Macro Now newsletter, show that Fed officials are getting more nervous about the employment outlook. Acheson also noted that Powell's comments about the Fed's approach following Wednesday's announcement could 'encourage or spook' markets.
Meanwhile, the U.S. job market has shown signs of slowing down, with nearly 911,000 fewer jobs being created than initially reported for a year-long period ending in March. Despite this, nearly nine in 10 users expect the price of Bitcoin to remain above $105,000 throughout September.
Gold, on the other hand, has been on a steady rise, with the precious metal reaching a record high on Tuesday above $3,730 and is up more than 10% over the past month.
Jerome Powell, the Fed Chair, vowed to remain data-driven in focus after keeping mortgage rates unmoved over five meetings this year. The Fed has a dual mission to keep inflation low and ensure full employment.
The CME's FedWatch tool forecast a 96% probability of a rate reduction in the days leading up to the decision, reflecting the growing uncertainty in the economy. The rate cut is expected to stimulate economic growth and help mitigate the impact of the economic slowdown.
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