Original | Odaily Planet Daily (@OdailyChina)
“Good afternoon,” on September 18 at 2:30 PM, this was the opening greeting from Chairman Powell after the Federal Reserve announced a 25 basis point rate cut. Although it contradicted market expectations and delivered a dovish statement, the market did not show a significant upward trend. (Odaily Note: According to the previous press conference summary, if Powell's opening greeting is “Good afternoon,” it indicates a hawkish view, and the market may decline; if it is “Hello everyone,” it indicates a dovish view, and the market may rise.)
After the Fed's decision was announced, spot gold hit a record high of $3,704 per ounce; however, the U.S. stock market showed mixed results, with the Dow Jones up 0.57%, the Nasdaq down 0.33%, and the S&P 500 down 0.10%. The cryptocurrency market saw a slight increase, but the gains were not substantial, with BTC rising 1.07% in 24 hours, ETH rising 2.66%, SOL rising 5.5%, and DOGE rising 6.2%.
This rate cut is the first by the Federal Reserve since December 2024. Although it met market expectations, the global market reacted tepidly. On one hand, Powell's speech in Jackson Hole in August had already opened the door for a rate cut, and the market had already “bought in.” After the rate cut was implemented, the market naturally reacted with “buy the expectation, sell the fact.” On the other hand, announcing a 25 basis point cut no longer satisfies the market's “appetite.” The market is more concerned about the Fed's policies for the remainder of 2025, with questions like “Will this be the first of a series of consecutive rate cuts?” and “How many times will there be rate cuts this year?” becoming the focus.
No Clear Signals on How Many Rate Cuts This Year
In the Q&A session following the interest rate announcement, Powell stated, “Today’s (easing) action can be seen as a type of risk management rate cut.” This decision reflects the Fed's priority to manage employment issues in the face of a “weak labor market + inflation not fully under control” dilemma. This decision is based on the Fed's belief that “tariffs only have a one-time impact on inflation, leading to a short-term rise in price levels.”
However, for the Fed, this year remains a unique moment, as it typically experiences a “weak labor market + rising inflation.” Such a rare economic situation naturally leads to a widening divergence in the Fed's interest rate forecasts.
The Fed's dot plot is a special chart used to show future interest rate expectations, directly reflecting the internal divergence and consensus on future rate trends. The dot plot released on September 18 shows that among 19 officials, 1 believes there will be no rate cuts in 2025; 6 believe there should be a cumulative cut of 25 basis points in 2025 (i.e., one cut); 2 believe there should be a cumulative cut of 50 basis points (i.e., two cuts); and 9 believe there should be a cumulative cut of 75 basis points (i.e., three cuts). One official (most likely Milan) believes there should be a significant cut of 150 basis points in 2025, indicating at least two more significant cuts (75 BP + 50 BP) within the year.
The dot plot reflects that compared to June (when 7 officials believed there would be no rate cuts in 2025), rate cuts have essentially become a consensus within the Fed, with the only difference being the magnitude of the cuts. Although the Fed's median forecast indicates a further cut of 50 basis points in 2025, this typically suggests a more accommodative market environment, leading to a potential rally in both the stock and cryptocurrency markets. However, Powell still indicated in the Q&A session that there is not much support within the FOMC for a 50 basis point cut.
This FOMC meeting believes that the inflation rise caused by tariff policies is only temporary, but Powell also indicated another possibility: if inflation impacts are more persistent, the Fed's responsibility will be to ensure that the current one-time price increase does not evolve into a sustained inflation problem. This leaves the market with further uncertainty.
Market Participants' Attitudes
Market participants have different interpretations of Powell's remarks.
George Goncalves, head of macro strategy at MUFG, believes that while the Fed has restarted the rate cut process, it has not entered a rate cut sprint mode. “This Fed decision is the most dovish statement they could make, and they have added another rate cut to the dot plot expectations for this year. However, it feels like the Fed has not entered a rate cut sprint mode; they have merely restarted the rate cut process because they acknowledge that the labor market is not as strong as they had anticipated.”
Michael Rosen, chief investment officer at Angeles Investments, stated, “Powell has tempered the market's initial expectations for a more aggressive monetary policy easing path. He acknowledges the weakness in the labor market but emphasizes that only in the event of a more severe situation, which is not currently evident, would they consider larger rate cuts.”
Some investors firmly believe that the Fed will significantly cut rates for the remainder of 2025. Nomura Securities expects the Fed to cut rates by 25 basis points in both October and December, having previously predicted a cut only in December, and anticipates further cuts of 25 basis points in March, June, and September of 2026.
CITIC Securities still expects the Fed to cut rates by 25 basis points in both the October and December meetings, but only after the final selection of the new Fed chair will the rate path for 2026 become clearer.
Cryptocurrency Market Participants Generally Optimistic
Cryptocurrency market participants are generally optimistic. Tom Lee, chairman of BitMine, stated in a recent CNBC interview that after the Fed's rate cut, Bitcoin and Ethereum could see significant increases in the next three months.
On-chain whales have also begun to vote with their feet, showing a preference for ETH. According to monitoring by Lookonchain, after the Fed's 25 basis point cut, an OTC whale (0xd8d0…c39d) spent 112.34 million USDC to buy 25,000 ETH at a price of $4,493.
At the same time, a whale/institution that made a profit of $74.92 million through ETH trading (0x2aA…dDa2) purchased 18,000 ETH through Wintermute at an average price of $4,487, using 80.77 million USDC early this morning. This address currently holds 530 million USDC and 25,000 ETH, valued at approximately $114 million.
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