The Federal Reserve lowered interest rates by 25 basis points on Wednesday, 10 December, marking its first policy shift toward easing as employment risks rise and inflation moderates.
The Federal Open Market Committee [FOMC] moved the federal funds target range to 3.50–3.75%, citing growing uncertainty in the economic outlook and a “shift in the balance of risks.”
Fed signals growing concern over employment
While the Fed acknowledged that inflation “remains somewhat elevated,” the statement placed unusual emphasis on the labour market, noting job gains have slowed and unemployment has ticked higher since mid-year.
Crucially, the Committee stated that downside risks to employment have increased in recent months, a clear indication that recession fears now outweigh inflation concerns.
The pivot marks a notable change in tone after two years of restrictive policy aimed at cooling prices.
The Fed said it will “carefully assess” incoming data before making further adjustments, but left the door open to additional cuts.
A liquidity shift markets have been waiting for
Rate cuts lower funding costs, weaken the dollar, and generally increase appetite for risk assets—all dynamics historically favourable for Bitcoin. When liquidity conditions loosen, institutional portfolios often rotate toward higher-beta assets, including crypto.
Bitcoin briefly reacted positively in early price feeds. However, broader market direction will likely depend on remarks from Chair Jerome Powell in the press conference.
Inflation still a concern—but less dominant
The Fed maintained its 2% inflation target and noted that inflation has risen from earlier levels this year, but not enough to justify continued restrictive policy at the expense of the labour market.
The Committee also emphasized the ongoing uncertainty and stated that it is prepared to adjust its policy if risks emerge.
What crypto traders should watch next
For crypto markets, the immediate question is whether today’s cut marks the start of a sustained easing cycle. Historically, Bitcoin has tended to outperform during early-stage rate-cut periods, as liquidity conditions improve and investors look beyond bonds and cash.
Upcoming inflation prints, labor data, and Powell’s additional guidance will determine whether this move represents a one-time adjustment or a long-term pivot.
Final Thoughts
- Today’s cut confirms what markets have been anticipating: the Fed has officially shifted from tightening to easing.
- If further cuts follow, crypto markets could see a renewed liquidity tailwind heading into 2026.
