The U.S. Federal Reserve has initiated a significant policy shift, marking its first interest rate cut since 2023. This pivotal move signals the central bank's entry into an easing phase, a decision carefully weighed against evolving economic conditions.
The Fed's Pivot to Easing
On October 29th, the Federal Reserve lowered interest rates by 25 basis points, setting the new federal funds’ target range at 3.75%–4.00%. This highly anticipated adjustment also confirmed the impending end of quantitative tightening (QT) by December 1st, concluding the balance-sheet unwind. Policymakers justified this pivot by citing evidence of easing inflation, a softening labor market, and increased downside risks to economic growth, despite inflation still being above the 2% target. This recalibration underscores a shift in priorities from aggressive restraint to economic support.
Market Response and Future Outlook
Following the Fed's announcement, market analysts, including Nomura, revised their expectations. Nomura now anticipates the Fed will maintain current rates in December, reversing an earlier projection for another cut, suggesting a more cautious approach to further easing. Fed Chair Jerome Powell further tempered expectations, cautioning that additional cuts this year are not guaranteed, citing internal divisions among policymakers and data gaps. Despite this uncertainty, the broader financial market, particularly digital assets like Bitcoin, has shown resilience. Bitcoin has maintained its footing amid macro currents, supported by significant structural demand, including over $6 billion in inflows to U.S.-listed Bitcoin ETFs this month. This suggests a constructive setup for digital assets, aligning with a more dovish policy outlook, even as short-term sentiment, as indicated by the Crypto Fear and Greed Index, remains cautious.
