The Federal Reserve delivered another 25bp rate cut, lowering the policy range to 3.50–3.75%. While the move itself was broadly expected, the underlying message was more nuanced.
The vote revealed a divided committee: two members dissented, and the dot plot showed six officials believe policy should already be on hold. Looking ahead, the median projection still points to just one additional cut in 2026.
Markets took the decision in stride. Bitcoin’s reaction was mildly negative, reflecting the fact that the cut was fully priced in and accompanied by a restrained outlook for further easing next year.
Incoming Data Keeps the Easing Debate Alive
Recent economic releases paint a mixed picture. JOLTS job openings surprised to the upside, particularly in transportation, suggesting payrolls could exceed expectations when reported on December 16. The NFIB small business survey also edged higher. Even so, broader growth indicators remain uneven, reinforcing uncertainty around the durability of the labor market.
Why the Fed’s Future Matters
Attention is increasingly shifting from current policy to what the Fed may look like by mid-2026. Kevin Hassett remains the leading candidate to succeed Chair Jerome Powell and has consistently argued that policy rates below 3% are reasonable over the long term. Should he be appointed—and if other board changes tilt dovish—Fed leadership could move decisively toward a growth-first stance.
At the same time, disinflationary pressures are becoming clearer. Energy prices are easing, rent inflation is slowing, and wage growth is moderating. The Fed has also acknowledged that recent job gains may have been overstated. Meanwhile, tariff-related inflation risks are unfolding more gradually than feared. Taken together, these dynamics suggest that further policy easing remains more likely than not over the medium term.
Bitcoin: Supportive Flows Despite Near-Term Uncertainty
For Bitcoin, the macro environment remains broadly constructive. While some large holders continue to sell, this supply has been absorbed by strong institutional demand. ETP inflows reached $928 million this week, bringing year-to-date flows to $47.8 billion, just shy of last year’s $48.7 billion record.
A softer U.S. dollar, easing financial conditions, and growing institutional allocations continue to support the asset class. That said, volatility risks remain elevated ahead of three key events: U.S. payrolls, U.S. CPI, and the Bank of Japan’s rate decision. Of these, labor data is likely to be the most influential, with a weaker-than-expected print potentially acting as a tailwind for digital assets.
What This Means for Advisors
For advisors, the message is clear: monetary policy is becoming less predictable, not more, and leadership changes at the Fed could materially shape the rate path beyond 2025. In this environment, assets that benefit from easier financial conditions and sustained institutional demand—such as Bitcoin—may continue to play a role as portfolio diversifiers. However, near-term volatility around key macro data underscores the importance of position sizing, timing awareness, and long-term allocation discipline.
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