The Federal Reserve (Fed) announced this morning (12/11) a rate cut of 0.25%, lowering the benchmark interest rate to 3.5%–3.75%. Chairman Powell stated that inflation remains high and employment is weakening, making policy decisions more challenging. The current interest rate has returned to a 'broadly neutral range,' and whether to cut rates further will depend on data. He emphasized that inflation caused by tariffs is temporary, and the overall economic outlook still leans towards strengthening. After the announcement, U.S. stocks and the bond market rose simultaneously, but the cryptocurrency market reacted mildly, with a total market value dropping by 0.3% in the past 24 hours. Bitcoin remains in the 91K–92K range, while Ethereum fluctuates between $3,200 and $3,300.
Policy must balance risks, and whether to cut rates in the future will depend on the data.
Powell stated that the reason for this 1 basis point cut is that inflation still has upward pressure, while the labor market is starting to weaken, causing a tug-of-war between the two policy goals. He also admitted that there is never a zero-risk policy.
Since September, the Fed has cumulatively cut interest rates by 3 basis points. Powell stated that this has brought the policy rate to a reasonable neutral range, and future decisions on rate cuts will depend on actual economic data, without prior guidance on direction.
Economic momentum is solid, GDP forecast has been revised upwards.
Powell pointed out that current economic activity shows a robust situation of "consumption and business investment," both maintaining growth. In contrast, the housing market remains weak. The recent brief shutdown of the federal government also affected this quarter's economic performance, but he expects that after the government resumes operations, the related impact is expected to be partially alleviated next quarter.
The Fed's latest economic forecast (SEP) has also revised this year's and next year's growth estimates upwards, predicting a GDP growth of 1.7% this year and 2.3% next year, both stronger than previous forecasts.
Interest rates are in the neutral range, and future actions will depend on the data.
Regarding whether the market should interpret this as the Fed entering a "wait-and-see" stage, Powell stated that current interest rates are already in a broadly neutral range, allowing the Fed to observe subsequent data more patiently. He emphasized that this does not imply that the next step will definitely be a rate cut or a halt in cuts, but rather hopes the outside world understands that the Fed's next move depends entirely on economic performance, not on preset directions.
AI investment and consumer spending provide support, making next year's GDP more optimistic.
Powell estimates that next year's growth will be more optimistic than previously expected, mainly due to resilient consumer spending, along with sustained investments in AI-related data centers and equipment driving corporate capital expenditures. He explained that if we exclude the short-term impact of the government shutdown on the statistics, next year's GDP growth is expected to be around 2.1%.
To bring inflation back to 2%, while maintaining a healthy labor market.
At the end of the press conference, Powell reiterated that the Fed's core mission is to "maintain a 2% inflation target" and "support maximum employment," and all adjustments to monetary policy are based on this principle. He emphasized that the Fed clearly understands the pressure inflation puts on households and recognizes the impact of a slowing labor market on the public, thus it will continue to strive to achieve its dual goals.
The crypto market reacts flatly, with Bitcoin and Ethereum maintaining a range of fluctuations.
Although the rate cut boosted the U.S. stock and bond markets, the crypto market performed relatively flat. According to CoinGecko, the total market capitalization of the crypto market fell by 0.3% in the past 24 hours, and the crypto market fear and greed index dropped from 30 yesterday to 29.
Bitcoin prices remain in the 91K–92K range, while Ethereum fluctuates in the 3,200–3,300 USD range.
This article discusses the Fed cutting rates by another basis point, improving the economic outlook, with Bitcoin and Ethereum maintaining their fluctuations. It first appeared in Blockchain News ABMedia.
