Effective Fed funds rate decreases to 4.08% on September 18 from 4.33% on September 17.

Effective Fed funds rate decreases to 4.08% on September 18 from 4.33% on September 17.

On September 17, 2025, the Federal Reserve (Fed) announced a 25 basis point (bps) cut in the federal funds rate, lowering the target range from 4.25-4.5% to 4-4.25% . This decision was made in response to higher downside risks in US employment and to support the economy as it navigates through uncertainties.

The Federal Open Market Committee (FOMC) statement highlighted that economic activity moderated in the first half of the year, with job gains slowing and the unemployment rate edging up but remaining low. Inflation has moved up and remains somewhat elevated . The Fed's goal is to achieve maximum employment and maintain inflation at 2% over the longer run.

Stephen Miran, the newly appointed governor by the Trump administration, dissented, preferring a 50 bps cut . This is Miran's first meeting and reflects his perspective on the need for more aggressive monetary policy to stimulate the economy.

The Fed maintained its year-end underlying inflation forecast at 3.1% but raised its year-end/2026 economic growth rate predictions from 1.4%/1.6% to 1.6%/1.8% . The Committee will continue to reduce its holdings of Treasury securities and agency debt and agency mortgage-backed securities.

The impact of the rate cut was immediate and significant in the crypto market. Bitcoin and altcoins experienced a rally, with Bitcoin up 1% and altcoins like BNB, SOL, ADA, DOGE, and XRP gaining 3-5% . The market liquidations reached $415 million, with $232 million in short liquidations .

Historical data suggests that the S&P 500 rises an average of 14% in the year following a Fed rate cut . This could bode well for the broader market, including Bitcoin, which is expected to follow a similar pattern.

The Fed's decision to cut rates by 25 bps marks a significant shift in monetary policy, aiming to support the economy amidst rising uncertainties. Investors and financial professionals should closely monitor the Fed's future actions and assess the impact on various asset classes, including equities and cryptocurrencies.