The Fed cut interest rates. What happens now?

The Fed delivered the widely expected 25 basis point cut, lowering the target range to 3.50–3.75%. However, the decision was not unanimous. Nine FOMC members supported the move, while Trump appointee Miron pushed for a deeper 50 basis point cut, and Chicago Fed President Goolsbee and Kansas City’s Schmid opposed any easing.

Looking ahead, the Fed is taking a pretty cautious approach. For 2026, they expect only one rate cut, which would bring the target range to 3.25–3.50%, followed by another cut in 2027 to 3.00–3.25%. After that, rates are likely to stay put. That makes it likely that the Fed will hit pause at its January meeting and maintain its current policy.

Powell’s comments reinforced that view. He suggested that rates might already be “neutral,” while inflation is still above the 2% target, leaving little room for major cuts. It’s no surprise that Treasury yields barely moved, though the S&P 500 bounced a little and the dollar index dipped slightly.

As for what might happen if Powell were replaced by Kevin Hassett, a Trump ally who favors lower rates, it’s worth remembering that Fed decisions are made as a team. FOMC members cannot be fired, and the system is designed so that no single person can control monetary policy.

What else stood out from the meeting?

The Fed raised its GDP growth forecast for 2026 from 1.8% to 2.3%, likely reflecting the productivity boost expected from AI. At the same time, inflation forecasts were trimmed from 2.6% to 2.4%. Overall, the outlook looks pretty optimistic, with no signs of a recession, which suggests there’s little reason to expect a sell-off in risk assets, including BTCUSD.

As for the announcement that the Fed will purchase $40 billion per month in short-term Treasury bonds, this should not be viewed as a return to quantitative easing. It is more of a technical measure to help manage liquidity conditions. The impact on the market thus should be limited, both on Treasury bonds and, even more so, on cryptocurrencies.

Overall, the meeting did not bring much clarity to the markets. Attention now turns to upcoming data: the crucial November jobs report, due out on December 16, and the latest inflation figures, due out on December 18. If those figures point to a weakening labor market and cooling inflation, hopes for a more dovish Fed could rise, and gold could also see a rebound.