The Fed cut interest rates again last night and markets reacted with a classic “good news, but not amazing news” move.
Stocks finished higher, while crypto saw big swings as traders tried to game out what happens next for rates and liquidity.
What The Fed Just Did
- The Fed lowered its main policy rate by 0.25 percentage points, the latest step in its shift away from the very tight policy of the last couple of years. This is the third cut this year.
- Officials framed this as another move toward a more “neutral” stance, but stressed that future cuts are not guaranteed and will depend heavily on incoming inflation and jobs data. One additional rate cut is expected in 2026, but the timing is uncertain.
In plain terms, the Fed is no longer slamming the brakes on the economy, but it also does not want to floor the gas pedal and risk re‑igniting inflation.
The committee looked split, with some members worried about growth and others still focused on inflation, which helps explain the cautious tone.
Powell’s Message
- Chair Jerome Powell highlighted that policy is now “less restrictive” and reminded markets the Fed has already cut a few times this cycle.
- He effectively said that while more cuts are possible, the bar is now higher and each decision will be data‑dependent.
Powell also pushed back against the idea that rate hikes are coming back soon, which reassured investors who feared a surprise U‑turn. At the same time, he signaled no desire to race back to near‑zero rates, keeping expectations for a slow and steady path.
Market Moves After The Decision
Here’s how markets and indices moved:
- S&P 500: up about 1%–1.5% on the day, with growth and tech stocks leading.
- Nasdaq 100: up around 1.5%–2% as rate‑sensitive, long‑duration names benefited from lower yields.
- Small‑cap index (e.g., Russell 2000): up roughly 2% as easier policy tends to help more leveraged and cyclical companies.
Crypto saw a more dramatic, whipsaw pattern:
- Bitcoin: an initial spike of around 3%–5% right after the announcement, followed by a partial fade as “sell‑the‑news” trading kicked in.
- Ethereum: a similar pattern, up roughly 2%–4% intraday before giving back some gains into the close.
- Smaller altcoins: more volatile, with double‑digit intraday swings in both directions as liquidity‑seeking traders tried to front‑run the next macro narrative.
What Analysts Are Saying
- Many strategists describe this as a “dovish, but not ultra‑dovish” cut: supportive for risk assets, but not the start of an aggressive easing cycle.
- The updated Fed projections point to fewer cuts ahead than markets once hoped, which caps some of the upside for the most speculative trades.
For equities, the takeaway is that a soft‑landing scenario is still on the table: inflation is easing, growth is slowing but not collapsing, and the Fed is trimming rates without panicking.
For crypto, the combination of slightly easier policy and ongoing uncertainty about the pace of future cuts likely means continued volatility rather than a straight‑line rally.
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