The American central bank's third interest rate cut in 2025 has lowered the policy rate to 3.5%–3.75%. One thing, however, has increased: concern about a possible recession.
Analysts warn that today's developments reveal weaknesses in the American economy, and many expect turmoil in the markets ahead.
Experts see warning signs behind the Fed's latest cut
The American central bank lowered interest rates again yesterday, the third cut following similar decisions in September and October. This brings the policy rate to its lowest level since November 2022.
In the press release, the Fed pointed out that overall economic activity continues to grow at a moderate pace. At the same time, policymakers admitted clear signs of cooling in the labor market, with weaker hiring and a slight increase in unemployment.
“Inflation has risen since the beginning of the year and remains somewhat elevated. The committee aims to achieve maximum employment and an inflation rate of 2 percent over time. The uncertainty surrounding the economic outlook remains significant. The committee is aware of the risks for both sides of its dual mandate and assesses that the risk to employment has increased in recent months,” the press release stated.
The rented cuts are usually well received by the stock and crypto markets, which often experience gains with lower borrowing costs. But not everyone is celebrating. Some market participants interpret the decision as a warning.
Economist Claudia Sahm also warned that investors should only hope for further rate cuts if they are willing to accept the risk of a recession. The FOMC's dot plot indicated only one additional rate cut in 2026. Note that seven of the nineteen central bank leaders do not believe in more cuts next year.
“If [Jerome] Powell and the Fed end up with many more cuts… then we probably do not have a good economy. Be careful what you wish for,” Sahm told Fortune.
At the same time, the central bank announced that it will purchase government bonds for $ 40 billion over the next 30 days. Henrik Zeberg, chief macroeconomist at Swissblock, believes this reveals underlying weaknesses in the economy.
“The truth is… the economy is NOT doing well. It is on the way down – and that increases the pressure on liquidity, which is the signal the Fed receives. But – the Fed does not see that the consumer is crushed – and that it will lead to recession,” he added.
Zeberg stated that his economic model has signaled a downturn since November 2024, reinforcing his view that the US is now on the way to a recession.
Recession indicators are flashing red as layoffs increase and small businesses collapse.
At the same time, more and more signs of recession are emerging. The strain in the labor market is increasing particularly rapidly. As of December 1, 2025, American employers have signaled about 1,200,000 layoffs.
“It is the highest level since the pandemic and the most since the start of the financial crisis,” FactPost stated on X.
An analyst emphasizes that when the annual number of lost jobs exceeds 1 million, a recession often follows – or it is already underway.
The Kobeissi Letter reported this week that American small businesses are also experiencing increasing financial pressure. A record-high 2,221 companies have filed for bankruptcy under Subchapter V so far this year. Over the past five years, bankruptcies have increased by 83%.
The increase comes despite the debt ceiling being lowered from $ 7.5 million to $ 3 million. Even with a lower threshold, the number of bankruptcies has increased.
“The increase is due to persistently high borrowing costs, cautious spending, and general economic uncertainty, which has weighed on the profitability of small businesses. American small business bankruptcies are increasing as if a recession is already underway,” commented The Kobeissi Letter.
With many recession signals flashing, the American economy faces significant trials. Rate cuts may provide short-term relief, but deeper economic weakness could put risky assets to the test.
For crypto investors, the key question is whether Bitcoin and other digital assets will behave as safe havens, or if they follow broader risk-free trends if the outlook worsens.
