Federal Reserve Decision: Third Rate Cut (3.50%-3.75%) | Why Did Stocks Rise and Will Bitcoin's Increase Hold?
The Federal Reserve concluded its final meeting of 2025 with a strategic decision to lower the target range for the federal funds rate by 25 basis points (bps), bringing the new range to 3.50% to 3.75%.[1, 2, 3] This marks the third consecutive cut since September.[4]
Why this cut now? Division and contradiction
The decision came amid a sharp division within the Federal Open Market Committee (FOMC) with a vote of 9 in favor of cutting rates versus 3 opposing votes.[5, 6] This division reflects the dilemma facing the central bank:
* Motivation for the cut: Increased weakness in the labor market, with unemployment rising to 4.4% [4], and specific reports indicating a loss of 32,000 jobs in November.[2, 7] The Federal Reserve chose to ease to avoid recession and support employment.[2]
* Pressure against cuts: Inflation continues to rise, with the Personal Consumption Expenditures (PCE) index expected to end 2025 at 3.0%, significantly above the 2% target.[3, 6]
The immediate market response: Bitcoin and stocks rise
The immediate reaction in financial markets was clear, as investors interpreted it as support for growth and a boost for liquidity:
* Stocks (sharp rise): Major stock indices rose sharply, with the Dow Jones Industrial Average increasing by 1.2% and the S&P 500 by 0.8%, reflecting investors' welcome of lower borrowing costs.[8]
* Dollar and commodities: The U.S. Dollar Index (DXY) fell by 0.5%.[8] In contrast, risk assets saw an increase, with Bitcoin reaching a daily high of around 93,600 dollars, and gold futures rising by 0.4%.[8, 9]
* Bonds (caution): Bond markets were less optimistic, with Treasury yields slightly declining to settle around 4.19%.[10] This caution suggests that bond investors do not believe inflation has been fully tamed.[9]
Warning 2026: Dot plot and Bank of Japan risks
Despite the current cut, the Federal Reserve's future guidance showed caution:
* Less accommodative outlook: The "Dot Plot" indicated that committee members expect additional cuts of only 50 to 75 basis points during 2026.[3, 9] This expectation is less accommodative than markets had anticipated, which may pressure risk assets that bet on deeper and faster cuts.[9]
* Global risk (BoJ): The biggest systemic risk lies in the divergence of monetary policy with the Bank of Japan (BoJ). While the Federal Reserve is cutting, the Bank of Japan is expected to continue normalizing its policy and may raise interest rates on December 19.[11] This divergence threatens to dismantle the "Yen Carry Trade," a massive financing strategy.[12] This reversal in capital flows could lead to liquidity withdrawal and sudden disruption in global markets, including the cryptocurrency market.[12]
In conclusion, the Federal Reserve successfully provided a positive boost to stock and cryptocurrency markets, but left cautious guidance for 2026 and a complex global backdrop, necessitating that investors assess whether the immediate gains will withstand upcoming challenges.[13]
#Bitcoin_and_interest #Interest_rate_cut_and_rise_of_assets #البيتكوين_والفائدة #خفض_الفائدة_وصعود_العملات #تداول_العملات_المشفرة
