The Fed cut interest rates by 25 basis points for the second time this year, and the market is betting on another cut by the end of the year.

The Federal Reserve announced a further reduction of the federal funds interest rate target range by 25 basis points to 3.75%–4%, marking the second rate cut within 2025. This move indicates that the Fed is shifting towards supporting economic growth, despite the U.S. inflation rate in September (YoY 3%) still being above the Fed's long-term target of 2%. Polymarket data shows that nearly 89% of traders expect the Fed to make another rate cut before the end of the year. The market is currently closely following Chairman Powell's post-meeting remarks to assess the direction of future monetary policy.

Policy Shift: Fed Confirms Second Rate Cut in 2025

After the two-day Federal Open Market Committee (FOMC) meeting, the Fed announced the widely expected interest rate cut, lowering the federal funds rate by 25 basis points. This decision adjusts the interest rate range from 4.0%–4.25% to 3.75%–4%. This marks the second time the Fed has taken easing measures this year, following the first rate cut of 25 basis points in September.

Despite the U.S. inflation rate in September (YoY 3%) being slightly lower than expected, it remains above the Fed's long-term target of 2%, which adds complexity to the balance of this rate cut. The voting results of the FOMC indicate that almost all members supported the decision, but there were still disagreements: Stephen Miran advocated for a 50 basis point cut, while Jeffrey R. Schmid opposed the cut. Analysts believe that this disagreement indicates that policymakers are striving to find a delicate balance between controlling Inflation and supporting economic rise.

Expert Interpretation of Powell's Hawkish Speech

In response to Powell's hawkish remarks last night stating, “Given the internal differences within the central bank and limited visibility, a rate cut in December is not a foregone conclusion,” major fund managers on Wall Street have all provided their interpretations:

Brandywine Global Portfolio Manager Jack McIntyre: “In a situation where you can only fly with one eye open, the Fed sees the slowdown in the labor market as a more concerning issue than sticky Inflation. Given that labor statistics are lagging indicators and there is a time lag in monetary policy, this stance is reasonable. Therefore, for October, the Fed would rather choose to cut rates further just in case. But what’s harder to understand is that odd range of divergence. Milan's call for a larger rate cut could be seen as too dovish and ignored. But Schmid’s opposition to a rate cut, coupled with Powell’s comments at the press conference—where he expressed a desire to maintain some distance between the Fed’s view on potential future rate cuts and the market's expectations for December—should not be underestimated. This divergence suggests that complacency in the financial markets will weaken, volatility will increase, and two-way capital flows will become more frequent.”

LPL Financial Chief Economist Jeffrey Roach: “The downside risks within the labor market are likely to ensure that the Fed continues to cut interest rates in December and throughout next year.”

Ryan Detrick, Chief Market Strategist at Carson Group: “The Fed did not go off script, cutting interest rates by 25 basis points as widely expected, while also keeping the door open for another rate cut in December. Chairman Powell acknowledged the potential issues with Inflation, but the weak labor market overshadowed those concerns, leading to this rate cut and potential future actions.”

Michael Pearce, Deputy Chief Economist at Oxford Economics: “The decision to cut rates by 25 basis points in October is not surprising, but a regional Fed chairman's unexpected hawkish dissent highlights that future actions are becoming more controversial. We expect the Fed to slow down the pace of rate cuts from here. Our view is based on the judgment that the labor market conditions will stabilize, but it is difficult to assert this in the absence of official data.”

Powell's Term Nearing Its End: Future Policy Direction Faces Uncertainty

This rate cut may be one of the last major policy moves during the tenure of Fed Chairman Jerome Powell. U.S. Treasury Secretary Scott Bessent has confirmed that President Donald Trump is considering five candidates to replace Powell, whose term is set to expire at the end of this year.

The decision on the chairperson expected to be made in December will have a significant impact on the Fed's monetary policy direction for 2026. The Trump administration previously advocated for more aggressive interest rate cuts to stimulate economic rise, so the choice of the new chairperson may signal a shift towards a more accommodative monetary policy.

The Subtle Response of Market Sentiment to the Shadow of Government Shutdown

The FOMC meeting took place under the shadow of the second longest government shutdown in U.S. history. Economists warn that the government shutdown could reduce GDP growth by 0.1% per week, exacerbating the uncertainty of economic recovery, particularly putting pressure on social programs such as federal employee unemployment and food assistance.

Despite the Senate's efforts to pass the Republican-backed funding bill, which failed multiple times, Vice President J.D. Vance's assurance of continued pay for military personnel has not fully alleviated widespread concerns about the resilience of the U.S. economy.

In terms of market reaction, Bitcoin and the stock market's responses have been relatively mild. This indicates that investors tend to look for further signals in Powell's post-meeting speech regarding whether the easing cycle will extend into December. According to data from Polymarket, nearly 89% of traders expect the Fed to make another rate cut before the end of the year, reflecting the market's high expectations for continued monetary easing.

Conclusion

The Fed's second interest rate cut confirms that the policy direction is shifting from aggressive tightening to supporting growth. However, against the complex backdrop of inflation still not meeting targets, the shadow of a government shutdown lingering, and the impending change of the Fed chair, the future monetary policy roadmap remains full of uncertainty. For investors in the crypto market and traditional financial markets, Powell's post-meeting statement and the appointment of the Fed chair in December will be key to assessing long-term trends and formulating investment strategies.

Disclaimer: This article is for informational purposes only and does not constitute any investment advice. The cryptocurrency market is highly volatile, and investors should make decisions with caution.