Earlier this Wednesday, Bitcoin, the leading cryptocurrency, briefly spiked above $93,000 in response to the Federal Reserve's decision to cut the benchmark interest rate by 25 basis points.
This is the third consecutive cut of this year. It brings the target federal funds rate down to around 3.50 %–3.75 %.
This has brought policy closer to the Fed’s long-term view of the neutral rate (3%).
No surprises
By and large, markets and economists were expecting the Federal Reserve to cut rates by 25 basis points on Dec. 10.
As of just before the meeting, the probability of a 25‑bp cut was widely estimated at around 90 %
Morgan Stanley, J.P. Morgan, Bank of America, and other major firms revised or affirmed forecasts of a quarter‑point reduction.
Inflation has shown signs of moderating in late 2025. Core measures like PCE and CPI were trending down slightly.
Even though the labor market remains tight, indicators like sluggish wage growth show that the economy is cooling. GDP growth, retail sales, and industrial production showed some slowing.
However, it should be noted that the vote was not unanimous. Austan Goolsbee and Jeffrey Schmid preferred to keep the rate unchanged. In the meantime, Stephen Miran (unsurprisingly) preferred to cut the rate by 50 basis points.
The “dot plot” projections remain largely unchanged, indicating two quarter-point reductions in 2026 and 2027.
The Fed has also stated that it is going to be buying $40bn of Treasury bills a month to ensure that the US financial system has enough liquidity.
During a press conference, Fed Chair Jerome Powell stated that inflation remains "somehow elevated."
Dan Burgin
Vladislav Sopov
U.Today Editorial Team