The Federal Reserve’s first 25bp interest rate cut in 2025 announced the beginning of the market debate.
This measure was expected, but Jerome Powell‘s pigeon remarks and divided viscosity of the Fed confused investors.
Powell, Risk Management Signal
Table of Contents
Powell describes interest rates as a risk management decision and mentioned the cracks in the US labor market.
The modified salary level is less than 911,000 jobs than the previous report, and long -term unemployment is increasing, showing a weak foundation than the surface level.
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“The risk of inflation is tilted upward, and employment risks are inclined downward.” – Powell Chairman
The Fed Chairman mentioned that policy makers do not have to move their interest rates quickly, but they must preemptively act to prevent deeper stagnation.
Powell argued that the inflation of the Trump tariff is more “slower and smaller than expected.”
But he admitted that price pressure could last until 2026. At the same time, the labor market explained that it is no longer “solid.”
He mentioned that the slowdown in employment, the reduction of supply due to the change of immigration, and the introduction of AI could affect beginner jobs.
conclusion: Powell’s remarks were more pigeon than when the rate cut in 2024 was cut. This suggests the transition to the direction of employment over the direction of employment over inflation.
Market reaction in the Fed Split… Dollar fall, stock liquidity attention
The new visual table shows that the central bank is difficult to find an agreement. Nine out of 19 officials expect to cut twice this year, and six do not expect further easing.
One even expected the impression, and Trump’s appointed Steven Miran opposed the 50bp cuts.
“This meeting was confused … One person thinks that this year is raising interest rates this year, and the other is expected to cut five times. It is a weakening of their reliability by manipulating the voting to create a ‘consensus’ fantasy and presenting this wide viscosity vote.” – Macro Investment Research Institute Jim Bianko
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Meanwhile, Kobeisera evaluated this measure as historical and emphasized the first interest rate cut in 30 years with more than 2.9% of core PCE inflation.
“It is clear that the Fed is prioritizing the labor market over inflation.” – Cobay, the market is now expected to cut up to four additional cuts by September 2026.
The immediate market reactions were quickly shown. The US dollar has fallen to the lowest level since February 2022, and stocks have stayed near the highest level.
The futures market reflects at least two additional cuts by the end of the year, and Calci data has soared more than 60%.
Yesterday, Powell’s speech, market interpretation?
The Bathart stressed that when the Fed cut interest rates within 2% of the highest level in the stock market, the S & P 500 rose 100% over the next 12 months and an average of 14%.
Fidelity’s Jurien Timmer said that this moment was compared with the LTCM crisis in late 1998, and the Fed made a brilliant rebound by making the Fed in a strong market.
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The cryptocurrency market is also watching the flow of liquidity, and analyst Ash Crypto emphasized the possibility of increasing liquidity due to interest rate cuts. This can lead to potential rise of cryptocurrency prices, he says.
“More cuts = more liquidity = rise,” – Analyst Ash Crypto
The necessity of prudence
But not everyone is convinced that this cut foretells a long -term rise cycle. Mark Minarvini insisted that the Fed’s actions were “formal”. Considering the persistence of inflation, it is unlikely to trigger an aggressive mitigation path, he says.
“Interest rates are generally strong when they occur outside the recession. But the Fed is preemptively reduced rather than reacting to a clear economic recession. This difference is important: this can reduce the impact on the market by lowering the possibility of aggressive mitigation route.”
On the other hand, the conversation economists emphasized the importance of balancing: inflation can cause inflation again by lowering interest rates, and if it moves too slow, there is a risk of rapid downturn in the labor market.
Price pressure caused by tariffs causes complex situations in low -income households, especially for more expenses for imported necessities.
Henrik Zeberg, a long period of time analyst, warned that the market could enter the enthusiastic stages before serious recession.
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“The current liquidity will create a higher peak for the market to collapse,” he wrote, comparing today’s rally to the actions of the late 1920s.
What is the following
The difference between strong market technical indicators and weakened fundamentals makes investors in an unstable position.
Investors believe that Powell suggests an additional interest rate cut. In this background, at least at this time, the market sentiment is strong as stocks set records and cryptocurrency rises.
At this point, Bitcoin was trading at $ 117,107 and Ethereum was trading at $ 4,572. Both assets were strong after the Fed’s decision.
Nevertheless, risk factors still exist and continue to weaken investor trust. These risk factors include:
- The weakening of the labor market leading to the economic downturn,
- The persistence of inflation due to tariffs, and
- Political tone of Powell’s “risk management” frame.
If the Fed is too aggressive, there is a risk of losing inflation inhibitory reliability. At the same time, the unemployment rate will be forced to force more extreme measures later if it moves too carefully.
Thus, risk assets such as Bitcoin can be defined by optimism based on liquidity for the next few weeks. But it is necessary to understand that this rally is on an unstable foundation.
Powell himself also admitted that the Fed is going through a “difficult situation.” The history of this moment shows that the market often rally and later adjusts.
