Fed Cuts Interest Rates, but Forward Guidance Remains Uncertain

The Federal Reserve has decreased interest rates by 25 basis points, bringing the target range to 3.5% to 3.75%. Despite this cut, Federal Reserve Chair Jerome Powell's mixed remarks may dampen a potential Bitcoin price rally until the next anticipated rate cut cycle in 2026.

Key Takeaways

The Federal Reserve has lowered interest rates to 3.5%-3.75%.
Jerome Powell’s mixed comments point to a challenging economic outlook.
A limited expectation of further rate cuts exists, with only one anticipated in 2026.
Bitcoin and other risk assets could generally benefit from low interest rates, though current expectations remain subdued.
The next Federal Reserve Chair may prioritize even lower rates.

Fed Cuts Interest Rates, but Forward Guidance Remains Uncertain

Overview of Recent Federal Reserve Developments

The Federal Reserve recently made headlines by slashing interest rates by 25 basis points, bringing the target range down to 3.5% to 3.75%. Nonetheless, analysts suggest that the mixed signals from Federal Reserve Chair Jerome Powell may stifle any significant rally in Bitcoin's price until the next rate-cutting cycle resumes in 2026.

In his remarks during Wednesday's Federal Reserve Open Market Committee (FOMC) meeting, Powell highlighted that “in the near term, risks to inflation are tilted to the upside and risks to employment to the downside, creating a complex situation. There is no risk-free path for policy.”

While these statements were less aggressive than some analysts anticipated, market expert and Coinbureau founder Nic Puckrin indicated that only one rate cut is expected in 2026 under Powell's guidance. Additionally, only a limited number of traders—24.4%—anticipate another rate cut at the upcoming FOMC meeting set for January 2026, based on data from the CME Group.

Bitcoin Price, Interest Rate
Interest rate target probabilities for January 2026. Source: CME

Insights from Powell's Remarks

Alongside this context, U.S. President Donald Trump has been considering a replacement for Powell, with Kevin Hassett, director of the National Economic Council, frequently mentioned as a likely candidate. It's noteworthy that Hassett has previously served as an adviser on Coinbase’s Academic and Regulatory Advisory Council.

In his discussion, Powell also reported that consumer spending and business investments remain strong, with low levels of layoffs and hiring. However, he noted that inflation continues to hover above the Federal Reserve’s 2% target, and the housing market still appears weak.

The Federal Reserve arrived at these assessments using existing market data, although Powell admitted that significant economic reports remain unavailable due to the ongoing U.S. government shutdown.

Bitcoin Price, Interest Rate
Jerome Powell delivers remarks following the December 2025 FOMC meeting. Source: Federal Reserve

As discussions around the Federal Reserve Chair unfold, Trump has pressured for a policy direction that favors additional rate cuts. With Powell's term set to end in May 2026, the changes in leadership could significantly influence future monetary policy.

Conclusion

In summary, while the Federal Reserve has taken steps to lower interest rates, the guidance from Powell suggests a complex economic landscape ahead. Investors in Bitcoin and other cryptocurrencies should remain tuned in for any shifts in fiscal policy that may emerge in the coming years.

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