The Federal Reserve on Wednesday lowered interest rates by 25 basis points for the third time this year, and kept its outlook for rate cuts unchanged at a time when the policy path forward has been muddied by growing divisions among members.
"In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook.," The Fed said in its statement.
The rate-setting Federal Open Market Committee, the FOMC, lowered its benchmark rate to a range of 3.5% to 3.75%. There were three dissents, with two in favor of pausing, and one preferring to cut by 50 basis points.
Rates are seen for falling to 3.4% in 2026, unchanged from the prior forecast. For 2027, rates are expected to fall to 3.1%, unchanged from the prior outlook.
The prospect of a third rate cut looked bleak in the weeks leading up to the December meeting as divisions among Fed members on the path forward continue to grow. But consensus was swung in favor of those in the dovish camp after New York Fed President John Williams, a close ally of Fed Chair Jerome Powell, signaled he would back further easing at the December meeting.
The divide among voting Fed members has been sparked by differing views over what kind of economy the Fed is dealing with. Those in the rate cut camp point to a softer labor market that requires the cushion of rate cut.
While the hawks flag stalling progress in bringing inflation back to the Fed’s 2% target. Usually, economic data would help Fed members reach consensus, but the government shutdown stopped the flow of key economic reports. $SOL $BTC
Japan's interest rates impact Bitcoin in 3 ways: 1. **Yen Carry Trade**: Higher rates in Japan make the yen more attractive, so investors borrow cheap money elsewhere, buy yen, and invest in Japan bonds – reducing Bitcoin demand. 2. **Risk Sentiment**: Japan's rates influence global risk appetite. Higher rates = lower risk appetite = lower Bitcoin prices. 3. **Market Liquidity**: Japan's rates affect liquidity in global markets. Lower liquidity = higher Bitcoin volatility. Got it?
Let's say Japan's interest rate is 0.5% and US is 4%. **Yen Carry Trade Example:** 1. Borrow $100 at 4% US interest. 2. Exchange $100 to ¥10,000 (hypothetical rate). 3. Invest ¥10,000 in Japan bonds at 0.5% + (higher return due to yen carry trade) = 2%. 4. Earn ¥200 interest, exchange back to $20. 5. Pay back $100 loan + $4 interest = $104. 6. Profit = $20 - $104 = -$84... wait no... carry trade gives higher return in Japan so lets say 3% so ¥300 7. Exchange ¥300 to $30 8. Profit = $30 - $104 = still loss so not possible But if it was possible people would do it and invest in bitcoin less **Risk Sentiment Example:** Japan raises interest rate to 1%. Investors think: * "Japan's getting strict, markets might drop." * Sell Bitcoin, buy safe Japan bonds. **Market Liquidity Example:** Japan raises interest rate to 1%. Investors withdraw from markets to invest in Japan bonds. * Bitcoin market liquidity drops. * Prices fluctuate wildly. $BTC $ETH
Japan's interest rates impact Bitcoin in 3 ways: 1. **Yen Carry Trade**: Higher rates in Japan make the yen more attractive, so investors borrow cheap money elsewhere, buy yen, and invest in Japan bonds – reducing Bitcoin demand. 2. **Risk Sentiment**: Japan's rates influence global risk appetite. Higher rates = lower risk appetite = lower Bitcoin prices. 3. **Market Liquidity**: Japan's rates affect liquidity in global markets. Lower liquidity = higher Bitcoin volatility. Got it?
Let's say Japan's interest rate is 0.5% and US is 4%. **Yen Carry Trade Example:** 1. Borrow $100 at 4% US interest. 2. Exchange $100 to ¥10,000 (hypothetical rate). 3. Invest ¥10,000 in Japan bonds at 0.5% + (higher return due to yen carry trade) = 2%. 4. Earn ¥200 interest, exchange back to $20. 5. Pay back $100 loan + $4 interest = $104. 6. Profit = $20 - $104 = -$84... wait no... carry trade gives higher return in Japan so lets say 3% so ¥300 7. Exchange ¥300 to $30 8. Profit = $30 - $104 = still loss so not possible But if it was possible people would do it and invest in bitcoin less **Risk Sentiment Example:** Japan raises interest rate to 1%. Investors think: * "Japan's getting strict, markets might drop." * Sell Bitcoin, buy safe Japan bonds. **Market Liquidity Example:** Japan raises interest rate to 1%. Investors withdraw from markets to invest in Japan bonds. * Bitcoin market liquidity drops. * Prices fluctuate wildly. $BTC $ETH
The prospect of a BOJ rate hike has stimulated alarm about a yen-led unwind that could crush bitcoin. In practice, the market setup in 2025 suggests that a sudden, mass liquidation tied solely to yen strength is less likely. The dominant risk is more structural: Japanese tightening could help anchor higher global yields, tightening financial conditions and gradually pressuring risk assets including crypto.
Investors should therefore broaden their focus beyond FX headlines to monitor yield dynamics, funding conditions and speculative positioning. Preparedness — through hedging, liquidity management and disciplined sizing — will be the most effective defense in a higher-yield 2025 market regime. $SOL $BTC $ETH
if Japanese interest rates and bond yields rise, and the yen strengthens, the carry trade might unwind, potentially triggering market turbulence and hitting asset valuations worldwide, particularly those of risky assets like cryptocurrencies like BTC According to previous record BTC down UpTo 14% to 20% three time when intrest rate changed
- White House economic adviser Kevin Hassett said Tuesday there is "plenty of room" to cut interest rates further, though he noted that rising inflation could alter this outlook.
Speaking at the WSJ CEO Council, Hassett, who is widely considered a front-runner to become the next Federal Reserve chair, compared the current economic environment to the 1990s, describing it as a "potentially extremely transformative time."
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When asked how he would respond if President Donald Trump requested interest rate cuts that he personally disagreed with, Hassett provided a specific example of when rate cuts would be inappropriate. "If inflation has gone from 2.5% to 4%, you can’t cut rates then," he said, according to a tweet from Wall Street Journal Fed reporter Nick Timiraos.
The comments from Hassett come ahead of the FOMC’s two-day meeting, which started today. On Wednesday, the FOMC is widely expected to cut interest rates by 25 bps to a range of 3.5-3.75%. If they follow through with a cut, it will be their third straight meeting with a cut since restarting their rate-cutting cycle in September. $SOL