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Key Takeaways
- The Fed cut rates by 25bps to 3.5%-3.75%, citing elevated uncertainty and rising employment risks.
- Bitcoin steadied at $92K after the decision, showing limited upside momentum following a decline from $94K earlier in the week.
The U.S. Federal Reserve lowered its benchmark interest rate by 25 basis points on Wednesday, setting the new target range at 3.5% to 3.75%. The move comes amid elevated uncertainty in the economic outlook and signals a possible shift in the Fed’s policy stance heading into 2026.
Bitcoin, which had been declining from $94K to $92K ahead of the decision, showed little reaction following the announcement, stabilizing around the $92K level with signs of limited upward momentum.
The reaction reflects a cautiously optimistic view among traders, who are now turning their attention to Chair Jerome Powell’s press conference for clues on future policy direction.
The Fed cited moderate economic expansion, a softening labor market, and persistently elevated inflation as key drivers behind the decision. Unemployment has edged higher through September, while inflation has picked up since earlier in the year.
In its policy statement, the Fed emphasized that the employment risks have increased and acknowledged the need to remain flexible in light of incoming data. While reiterating its long-term inflation target of 2 percent, the Committee said it will assess the extent and timing of further rate adjustments based on evolving economic conditions.
The central bank also introduced a new measure, announcing it would initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves. This marks a significant shift from its earlier stance on balance sheet reduction, indicating a possible end to the Fed’s quantitative tightening campaign.
Nine members of the Federal Open Market Committee voted in favor of the rate cut, including Chair Powell and Vice Chair Williams. Three members dissented: Stephen Miran, who favored a deeper 50bps cut, and Austan Goolsbee and Jeffrey Schmid, who preferred to keep rates unchanged.
The next FOMC meeting is scheduled for late January 2026. Markets will closely monitor Powell’s forward guidance to gauge whether additional cuts are likely in the first quarter of the year.