The Federal Reserve's third interest rate cut in 2025 brought the federal funds rate down to 3.5%–3.75%. However, this also brought with it a concern: the risk of an economic recession is increasing.
Experts warn that current trends reveal many weaknesses in the US economy, and most predict significant market volatility in the near future.
Experts see warning signs behind the Fed's latest rate cut.
Yesterday, the US Federal Reserve continued to cut interest rates , marking the third consecutive reduction, following moves in September and October. This latest decision brought the federal funds rate to its lowest level since November 2022.
In its announcement, the Fed stated that overall economic activity remains at a moderate pace. However, policymakers also acknowledged that the labor market is slowing significantly, with a decline in new jobs and a slight upward trend in the unemployment rate.
“Inflation has risen since the beginning of the year and remains at a fairly high level. The Committee is aiming for maximum employment and 2% inflation in the long term. Uncertainty about the economic outlook remains high. The Committee is paying attention to risks on both sides of this dual mandate and assesses that downside risks to employment have increased in recent months,” according to the Fed press release .
Interest rate cuts are typically well-received by stock and crypto markets , due to reduced borrowing costs. However, not everyone is happy about this. Some observers believe the move is a warning sign of risks to the economy.
Economist Claudia Sahm also noted that investors should only expect further interest rate cuts if they are prepared to face the risk of a recession. The latest FOMC DOT plot shows only one more cut in 2026. Notably, seven out of nineteen officials do not expect any further interest rate cuts in 2026.
“If [Jerome] Powell’s Fed has to cut interest rates even further… then the economic situation is probably not good. Be careful what you wish for,” Sahm Chia Fortune.
In addition to the interest rate cut, the central bank also announced plans to purchase $40 billion worth of Treasury bonds over the next 30 days. Henrik Zeberg, a macroeconomist at Swissblock, believes this reveals the underlying instability of the US economy.
“The reality is… The economy isn’t really doing well. It’s going down — which puts pressure on liquidation, and that’s the signal the Fed is seeing. But the Fed doesn’t understand that consumers are under heavy pressure — and that will lead to a recession,” he added .
Zeberg also stated that the economic model he developed showed signs of slowing down as early as November 2024, further reinforcing the view that the United States is nearing a recession.
Recession indicators are signaling a warning as layoffs surge and small businesses collapse.
Meanwhile, signs of recession continue to mount. Pressure on the US job market is also increasing sharply. As of December 1, 2025, US businesses had announced approximately 1.2 million job cuts.
"This is the highest number since the pandemic began, and also a record high since the start of the Great Recession," FactPost Chia .
One analyst emphasized that when annual layoff figures exceed 1 million, an economic recession is usually imminent or has already begun.
This week's Kobeissi Letter also reported that small businesses in the U.S. are facing significant financial difficulties. A total of 2,221 businesses have filed for Chapter V bankruptcy this year. Over the past five years, the number of bankruptcies has increased by 83%.
The wave of bankruptcies has surged despite the debt limit being lowered from $7.5 million to $3 million. Even under the tightening conditions, the number of businesses filing for bankruptcy continues to rise.
“The main reasons are that borrowing costs remain high, consumers are spending cautiously, and general economic uncertainty has impacted the profitability of small businesses. The number of small business bankruptcies in the U.S. is rising sharply as if the economy were in a recession,” Kobeissi Letter commented .
With a series of recessionary signals emerging, the US economy is facing significant challenges. While interest rate cuts may provide short-term relief, deeper weaknesses in the economy could put risky assets to the test.
For crypto investors, the key question is whether Bitcoin and other digital assets will become a safe haven, or whether they will react like other risky investment channels when the economic outlook worsens.
