Fed Cuts Rates as Expected; Bitcoin Slides on Chair Powell's December Guidance -

Updated The US Federal Reserve reduced its key target interest rate by a quarter percentage point to a range of 3.75%-4.00%, in line with the central bank’s earlier guidance and most analysts’ expectations. Bitcoin slipped on the news, before extending gains on Chair Powell’s additional commentary.

Powell spooked traders by hesitating to offer stronger guidance on the prospect of an additional rate cut at the next gathering of the central bank’s Federal Open Market Committee (FOMC).

“A further reduction in the policy rate at the December meeting is not a foregone conclusion: far from it,” he said, in prepared remarks shortly after the start of the press conference at 18:30 UTC.

Uncertain economic outlook

The Fed said economic activity has been expanding at a “moderate pace,” but job gains have slowed, and unemployment has edged higher, according to a statement. Inflation “remains somewhat elevated,” the statement noted, without referring specifically to the causes. Overall, the Fed continued to guide markets that uncertainty about the US economy’s outlook remains “elevated”.

Powell elaborated on the guidance, warning “the downside risks to employment appear to have risen in recent months, ” while “it is possible that the inflationary effects could be more persistent.”

Bitcoin extends losses

Financial markets were initially little changed on the news, with Bitcoin and spot gold slipping 0.4% in the lead up to the press conference. US equities were almost unchanged. The original cryptocurrency then slid as much as 2% over about five minutes, dropping beneath $110,000, according to a composite price on TradingView, as Powell spoke about the board of governors’ thinking. Spot gold also declined.

The officials also announced plans to end the central bank’s reduction in its securities holdings on 1 Dec, a move likely aimed at further easing financial conditions.

The 10-person majority, led by Chair Jerome Powell, underscored their commitment to supporting maximum employment and returning inflation to its 2 percent objective, in a year in which many American companies and consumers have expressed concerns about the impact of the Trump administration’s international trade tariff assault.

Dissenters

Powell himself is dealing with a pair of rebels in his own ranks, including Fed Board member Stephen Miran, who Trump appointed just before the last FOMC meeting in September.

Miran voted for a 50-basis point cut this week, Fed records show, and is presumed to be advocating deeper cuts throughout the fourth quarter, in line with the White House’s view that a reduction in borrowing costs would benefit the economy. Despite Trump’s denial that tariffs are fueling price rises for the consumer, Powell clearly stated the opposite:

“There will be some additional increase in inflation because it takes a while for tariffs to work their way through the production chain and finally get to consumers,” he said, adding that prices will continue to rise gradually as tariffs come into effect into the spring, “in theory”. Meanwhile, “non-tariff inflation” is close to the 2 percent goal.

A 10-2 vote is unusual in FOMC meetings, leaving Powell under pressure to re-establish a firmer grip on the board. Dissent ran both ways, with Jeffrey R. Schmid of Kansas proposing to hold the rate steady.