Powell signals potential rate cut at September 2025 meeting

Federal Reserve Chair Jerome Powell signaled a potential rate cut as early as the September 2025 meeting, marking a shift in the central bank's stance toward easing. The remarks came during his Jackson Hole speech, where Powell emphasized that the decision to cut rates would depend on incoming economic data and the evolving balance of risks to inflation and employment. While avoiding a firm commitment, Powell acknowledged rising downside risks to the labor market, including a sharp falloff in job creation, which may warrant a more accommodative policy [1].

The Fed currently maintains a restrictive stance, with inflation remaining above its 2% target for four consecutive years. Powell confirmed that the central bank is moving away from its flexible average inflation targeting (FAIT) framework, opting for a more forward-looking approach that prioritizes preemptive action to manage inflation risks. This shift signals a more proactive stance in response to the economic environment [5].

Markets reacted positively to Powell’s comments. The S&P 500 surged nearly 1.3% in the immediate aftermath of the speech, while Treasury yields dropped significantly. The 10-year yield fell seven basis points to 4.26%, and the two-year yield, which is more sensitive to rate expectations, dropped 10 basis points to 3.69%. These moves reflected growing investor confidence in the likelihood of a near-term rate cut [3].

According to analysts, the probability of a 25-basis-point rate cut at the September meeting rose to 91%, up from 71% before the speech was released. The market also now sees an 85% chance of at least 50 basis points of easing across the final three meetings of 2025. However, expectations for a larger 75-basis-point cut remain low, with only a 37% probability, suggesting that a rapid pace of easing is not expected [4].

Powell also addressed concerns about President Trump’s proposed tariffs, stating that while they could theoretically create inflationary feedback loops, they are unlikely to significantly impact the Fed’s policy path. He reaffirmed the central bank’s independence and data-driven approach to decision-making, a sentiment that was well-received by markets [6].

The potential rate cut has also sparked attention in the cryptocurrency market. Bitcoin, currently priced at $114,914.85 with a market cap of $2.28 trillion, is seen as a potential beneficiary of monetary easing. Historical trends suggest that lower interest rates could drive increased demand for risk assets, such as cryptocurrencies. Analysts from Coincu note that Powell’s signal is likely to encourage liquidity flows into higher-risk assets, including digital currencies, which could lead to higher total value locked (TVL) in DeFi platforms [7].

Bitcoin’s dominance remains at 57.41%, despite a 37.30% drop in recent trading volume. Over the past 60 days, the cryptocurrency has seen a 7.94% increase in price, reflecting continued investor interest. However, it has also experienced a 0.74% decline over the past 24 hours, indicating ongoing volatility in the market [7].

Investors are now closely watching the August jobs and inflation reports, which will play a critical role in shaping the Fed’s next steps. Powell reaffirmed the central bank’s data-dependent approach, stating, “We remain committed to our data-dependent approach in assessing future policy adjustments.” This message underscores the uncertainty surrounding the timing and magnitude of future rate cuts [2].

The evolving Fed policy has already begun to influence market sentiment and asset allocation. Analysts believe that a rate cut could create a favorable environment for cryptocurrencies, as investors seek alternative assets in a low-interest-rate scenario. This trend may further support investor appetite for yield-bearing digital assets, especially in a climate of monetary easing [7].

[1] title: Powell hints at long-awaited rate cut but admits Fed in ' ...

url: https://www.pbs.org/newshour/show/powell-hints-at-long-awaited-rate-cut-but-admits-fed-in-challenging-situation

[2] title: Powell signals Fed may cut rates soon even as inflation ...

url: https://apnews.com/article/inflation-federal-reserve-powell-287af1c758a30d67f5384d17423c5029

[3] title: How Markets Reacted After Powell Signaled Potential Rate ...

url: https://www.investing.com/analysis/how-markets-reacted-after-powell-signaled-potential-rate-cuts-200665768

[4] title: Fed Rate Cut Odds See Jackson Hole Jump

url: https://www.investors.com/news/economy/federal-reserve-chairman-jerome-powell-jackson-hole-speech-sp-500/

[5] title: Fed's Powell Signals Rate Cuts

[6] title: Powell Isn’t Too Worried About Trump Tariffs

[7] title: Why Powell's Jackson Hole Speech Suggests an Interest ...

url: https://www.morningstar.com/economy/why-powells-jackson-hole-speech-suggests-an-interest-rate-cut-is-way