Key Takeaways
- The Federal Reserve cut rates by 25 basis points to 4.00–4.25%, the first reduction since December.
- The move reflects the Fed’s balancing act between a slowing labor market and still-elevated inflation.
- Bitcoin and other assets moved slightly down after the announcement.
On Wednesday, the Federal Reserve delivered its first rate cut since December, trimming the benchmark federal funds rate by 25 basis points.
The widely expected move underscores the central bank’s delicate balancing act between a slowing labor market and persistent inflation and sets the tone for monetary policy heading into 2026.
The Fed Cuts Rates As Expected
The U.S. Federal Reserve lowered its benchmark rate by 25 basis points, setting the federal funds target range at 4.00%-4.25 % from 4,25%-4,50%.
The move, widely anticipated by markets, marks the first rate reduction since December and reflects the Fed’s balancing act between easing a softening labor market and guarding against inflation pressures.
The decision was passed by a vote of 11-1, with the new appointed FOMC member Marin as the only one who voted to cut rates by 0.50%.
The FOMC acknowledged a worsening of inflation, with headline CPI at 2.9% in August, but stressed that policy would remain “data-dependent” heading into 2026.
Market Reaction
- Equities: The S&P 500 is up by 0.1% after the move, at 6,616.95 points. The Nasdaq saw a 0.2% loss, recovering after a more marked slowdown.
- Bonds: The 2-year Treasury yield slipped by 0.1%, while the 10-year yield was almost unchanged.
- Dollar: The U.S. Dollar Index (DXY) hovered around 96.3, reflecting weakness.
Crypto Market’s Reaction
Bitcoin, trading near $116,500 pre-decision, fell to $116,180 in the minutes following the cut. Ethereum also dipped to $4,496.91, though it has shown a slight rebound at the time of writing.
Lower yields reduce the opportunity cost of holding non-yielding assets like BTC and ETH, offering a modest liquidity boost.
As Treasury yields decline, stablecoin issuers such as Circle and Tether could see narrower reserve income.
Futures now imply a year-end policy rate near 3.75-4.00%, as the Fed said that “Recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated.”
Fed’s First Cut Since December
Michael Brown from Pepperstone told CCN, “As expected, and had been fully discounted by money markets, the FOMC delivered a 25bp cut at the conclusion of the September meeting, lowering the target range for the fed funds rate to 4.00-4.25%, in a move that marks the first rate reduction since the tail end of 2024.”
In its accompanying policy statement, the Committee updated its economic assessment, noting that job gains have slowed, unemployment has edged higher, and inflation remains somewhat elevated.
Fed funds target rate. | Credit: Pepperstone
“Turning to the latest Summary of Economic Projections, the Committee marginally upgraded their expectations for economic growth over the short-term, while also penciling in a higher inflation profile as well, even if the 2% target is still set to be achieved by the end of the forecast horizon in 2028,” Brown added.
“Meanwhile, the updated dot plot pointed to a further 2x 25bp cuts being delivered this year, with another 50bp of easing being delivered next year, followed by a solitary 25bp cut in 2027, all considerably more dovish than expected, and suggesting a front-loading of cuts akin to what the OIS curve had recently been discounting.”
Giuseppe Ciccomascolo began his career as an investigative journalist in Italy, where he contributed to both local and national newspapers, focusing on various financial sectors.
Upon relocating to London, he worked as an analyst for Fitch's CapitalStructure and later as a Senior Reporter for Alliance News. In 2017, Giuseppe transitioned to covering cryptocurrency-related news, producing documentaries and articles on Bitcoin and other emerging digital currencies. He also played a pivotal role in establishing the academy for a cryptocurrency exchange website. Crypto remained his primary area of interest throughout his tenure as a writer for ThirdFloor.
