US Federal Reserve Chair Jerome Powell announced that the 19 members of the Federal Open Market Committee (FOMC) are still divided regarding additional interest rate cuts for 2025.
During Wednesday’s press conference following the Fed’s 25-basis-point rate reduction, Powell stated that the central bank is attempting to maintain a balance between its dual mandate of maximum employment and price stability amidst a unique situation where the labor market is weakening while inflation remains high. Powell remarked:
“You will have seen that we have 10 participants out of 19 who wrote down two or more cuts for the remainder of the year, and nine who wrote down fewer than that. In fact, in a good number of cases, no more cuts.”
Powell stated that the “median” FOMC projection from the Federal Reserve’s Summary of Economic Projections (SEP), the quarterly outlook for the US economy that guides interest rate decisions, anticipated interest rates to be at 3.6% by the end of 2025, 3.4% by the end of 2026, and 3.1% by the end of 2027.
“I would encourage people, as always, to view the SEP through the lens of probability, and, therefore, there are various possible outcomes and probabilities rather than guarantees,” Powell added.
The recent rate cut is the first of 2025, lowering the US interest rate to a range of 4%-4.25%.
Crypto investors are actively speculating about the potential for further cuts in 2025, as these are perceived as a positive catalyst for risk-on asset prices, benefiting from credit expansion and affected negatively by credit contraction.
Related: Federal Reserve expected to slash rates today, here’s how it may impact crypto
Crypto markets are likely to benefit from compressing interest rates
“Approximately $7.2 trillion-$7.5 trillion remain in money market funds, whose yields will now begin to decline, creating a strong incentive for capital to shift back into equities and alternatives like crypto,” predicted Matt Mena, crypto research strategist at exchange-traded product (ETP) provider 21Shares.
Mena suggested that Bitcoin (BTC) is set for a Q4 rally that could drive its price beyond its all-time high of around $124,000. According to Mena, 62% of traders on Polymarket, a prediction market platform, anticipate BTC will reach $130,000 in 2025.
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