The US Federal Reserve (Fed) announced a 25 basis point interest rate cut this morning (December 11th), lowering the benchmark interest rate to 3.5%–3.75%. Chairman Powell stated that persistently high inflation and weakening employment make policy decisions more challenging. He added that interest rates have now returned to a "broadly neutral range," and further rate cuts will depend on data. He emphasized that tariff-induced inflation is temporary, and the overall economic outlook remains bullish. Following the announcement, US stocks and bonds rose in tandem, but the cryptocurrency market reacted mutedly, with the total market capitalization falling slightly by 0.3% in the past 24 hours. Bitcoin remained in the $91,000–$92,000 range, while Ethereum fluctuated between $3,200 and $3,300.
Policy must balance risks; whether or not interest rates will be cut in the future depends on data.
Powell stated that the reason for the 25 basis point rate cut was that inflation still faces upward pressure, while the labor market is beginning to weaken, causing the two policy objectives to conflict. He also acknowledged that there is never a policy with zero risk.
Since September, the Fed has cut interest rates by a total of 25 basis points. Powell stated that this has brought the policy rate to a reasonable neutral range, and that further rate cuts will be decided based on actual economic data, without prior notice.
With robust economic momentum, GDP forecasts have been revised upwards accordingly.
Powell pointed out that current economic activity is showing solid growth in both "consumption and business investment." 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 the impact to ease somewhat in the next quarter once the government reopens.
The Fed's latest SEP also raised its growth forecasts for this year and next, predicting GDP growth of 1.7% this year and 2.3% next year, both stronger than previously forecast.
Interest rates are in the neutral range; further actions will depend on the data.
Regarding whether the market should interpret this as the Fed entering a "wait-and-see" phase, Powell stated that interest rates are currently within a broadly neutral range, allowing the Fed to more patiently observe subsequent data. He emphasized that this does not imply a guaranteed rate cut or a halt to rate cuts, but rather hopes the outside world understands that the Fed's next move depends entirely on economic performance, not on a predetermined direction.
AI investment and consumer spending provide support, making next year's GDP outlook more optimistic.
Powell forecasts more optimistic growth next year than previously expected, primarily due to resilient consumer spending and continued growth in corporate capital expenditures driven by AI-related data centers and equipment investment. He explained that if the short-term impact of the government shutdown on statistics is excluded, GDP growth next year will 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 mandate is to "maintain the 2% inflation target" and "support maximum employment," and that all adjustments to monetary policy are based on these objectives. He emphasized that the Fed is well aware of the pressure inflation puts on households and understands the impact of a slowing labor market on people, and therefore will continue to work towards achieving these dual mandates.
The crypto market reacted mutedly, with Bitcoin and Ethereum remaining within a trading range.
While the interest rate cut boosted the US stock and bond markets, the cryptocurrency market performed relatively flat. According to CoinGecko , the overall market capitalization of the cryptocurrency market fell 0.3% in the past 24 hours, and the cryptocurrency fear and greed index also dropped from 30 yesterday to 29.
Bitcoin prices remain in the $91,000 to $92,000 range, while Ethereum fluctuates between $3,200 and $3,300.
This article, titled "Fed Cuts Rates by Another 1 Basis Point, Economic Outlook Improves, Bitcoin and Ethereum Remain Volatile," first appeared on ABMedia, a ABMedia .
