Federal Reserve Cuts Rates by 25 Basis Points, But Future Policy Remains a Puzzle

The Fed just made its move. A 25-basis-point cut is official. Markets got what they wanted—on paper.

The Real Story: Mixed Signals

Don't pop the champagne yet. The statement and press conference were a masterclass in central bank ambiguity. 'Data-dependent' was the phrase of the day, repeated like a mantra meant to soothe and confuse in equal measure. They gave with one hand—the cut—and took with the other, hedging every forward-looking comment.

What This Means for Digital Assets

Cheaper money has historically been rocket fuel for risk assets, and crypto sits firmly in that camp. A lower cost of capital makes speculative bets more attractive. But the Fed's hesitancy to commit to a clear path forward injects volatility—the very thing institutional money claims to hate (while secretly trading on it, of course).

The bottom line? The liquidity tap is dripping, not flowing. It's a tentative nod to easing, wrapped in enough bureaucratic caution to give every analyst a different headline. For crypto, it's a net positive with a side of uncertainty—a classic recipe for choppy, headline-driven price action. Just another day where the market's fate hinges on parsing the poetry of economists who get paid to never say what they mean.

TLDR

• Federal Reserve cut interest rates by 25 basis points to 3.5%-3.75% range on December 10, 2025
• Two Fed members voted against the cut, while one member voted for a larger 50 basis point reduction
• Fed Chair Jerome Powell cited upside inflation risks and downside employment risks as key concerns
• Only 24% of traders expect another rate cut at the January 2026 FOMC meeting
• President Trump is considering replacing Powell when his term expires in May 2026, with Kevin Hassett as reported frontrunner

The Federal Reserve reduced interest rates by 25 basis points on December 10, 2025, bringing the target range to 3.5% to 3.75%. This marks the third consecutive quarter-point reduction and represents the lowest borrowing costs since 2022.

JUST ANNOUNCED: The Federal Reserve just cut interest rates by 0.25 points, lowering interest rates to 3.5%-3.75% #FOMC

The Fed Chair Jerome Powell: "Today, the interest rate will be lowered by 25 basis points (0.25%)." pic.twitter.com/NSDafcaMNy

— AJ Huber (@Huberton) December 10, 2025

The rate cut happened despite unusual division among Fed members about the decision. Two members voted against the reduction and preferred to keep rates unchanged. These dissenting votes came from Kansas City Fed’s Jeffrey Schmid and Chicago Fed’s Austan Goolsbee.

Fed Governor Stephen Miran, a recent TRUMP appointee, voted for a larger 50 basis point cut instead. This level of public disagreement among Fed members is uncommon and signals uncertainty about the economic path ahead.

Fed Chair Jerome Powell addressed the decision at Wednesday’s Federal Open Market Committee meeting. He stated that near-term inflation risks lean to the upside while employment risks lean to the downside. Powell described this as a challenging situation with no risk-free policy path.

The Fed’s policy statement noted that uncertainty about the economic outlook remains elevated. The Committee expressed concern about downside risks to employment that have risen in recent months.

Bitcoin’s price showed volatility immediately following the announcement but stayed around the $92,400 level. U.S. stocks moved slightly higher and the 10-year Treasury yield dropped two basis points to 4.15%.

Updated Economic Projections Show Mixed Outlook

The Fed released updated economic projections alongside the rate decision. Core inflation is now expected at 3% for 2025 and 2.5% for 2026, each down 10 basis points from previous estimates.

GDP growth projections increased to 1.7% for 2025 and 2.3% for 2026. These figures are up from previously estimated 1.6% and 1.8% respectively.

Powell noted that consumer spending and business investment remain solid. Layoffs and hiring both remain at low levels according to available data.

However, inflation stays somewhat above the Fed’s 2% target. The housing sector continues to show weakness in the current economic environment.

The Fed acknowledged it is missing months of public economic reports due to the U.S. government shutdown. This data gap creates extra challenges for policy decisions.

Market Expects Limited Rate Cuts in 2026

The Fed’s DOT plot projections show policymakers expect just one rate cut in 2026. Market participants had priced in two rate cuts for next year before this announcement.

CME Group data shows only 24.4% of traders expect a rate cut at the next FOMC meeting in January 2026. This represents a sharp decline in expectations for continued monetary easing.

The Fed also announced plans to begin purchases of shorter-term Treasury paper as needed. This MOVE aims to maintain an ample supply of reserves as reserve balances have declined.

President Trump has been actively considering a replacement for Powell. Powell’s term as Fed Chair is set to expire in May 2026.

Kevin Hassett, director of the National Economic Council, is widely reported as the frontrunner for the position. Hassett previously served as an adviser on Coinbase’s Academic and Regulatory Advisory Council.

Trump has publicly pressured the next Fed chair to implement more aggressive rate cuts. The transition in Fed leadership could bring changes to monetary policy direction in 2026.