Federal Reserve Signals Further Rate Cuts to Support Labor Market
What to Know:
- September rate cut marks start of new easing cycle.
- Impacts traditional and crypto markets, raising liquidity.
- Subsequent rate cuts will be crucial for market stability.
The Federal Reserve, led by Mary C. Daly and Jerome Powell, cut interest rates by 25 basis points on September 17, 2025, to address labor market weakening.
This policy shift suggests more rate cuts might occur, affecting liquidity, potentially strengthening cryptocurrencies like BTC and ETH, and impacting the broader financial markets.
The Federal Reserve cut interest rates by 25 basis points on September 17, 2025, primarily to support a faltering U.S. labor market.
This move aims to stabilize employment and financial markets, with significant implications for liquidity and investment patterns both in traditional finance and cryptocurrency sectors.
Advocacy from Federal Reserve Leaders for Rate Cuts
San Francisco Fed President Mary C. Daly and Fed Chair Jerome Powell have strongly advocated for rate cuts, noting ongoing job market challenges. The September rate cut is part of a broader strategy to cushion economic downturns, as detailed in the FOMC Press Conference.
Further reductions are anticipated within 2025 amid internal Fed debates. The cut aims to alleviate pressure from technological automation and economic headwinds affecting employment. Mary C. Daly stated, “The Fed did a rate cut to try to support the labor market. The job market has softened quite a bit over the last year. Part of job-market slowing is about US economic outlook. It’s very challenging to know how much jobs slowing is from AI.”
Cryptocurrency Market Gains from Enhanced USD Liquidity
Cryptocurrencies like BTC and ETH stand to benefit from increased market liquidity. Lower rates typically bolster USD liquidity, providing a favorable atmosphere for risk assets, as highlighted in the Monetary Policy Press Release.
DeFi and stablecoins could see heightened activity due to improved borrowing conditions. Traditional financial sectors also expect enhanced liquidity, influencing global market dynamics.
Rate Cuts Target Deep Labor Market Issues
Unlike in 2019, where cuts balanced growth, current measures respond to deeper labor market issues, elaborated in Introducing Chicago Fed Labor Market Indicators. These include structural shocks like tariffs and AI-driven changes.
Potential outcomes entail increased inflows into crypto and risk assets. Past trends suggest that such policies boost speculative behavior, highlighting the importance of careful monitoring.
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