The US Federal Reserve decided this week to cut interest rates by a further 25 basis points, lowering the target range to between 3.50 and 3.75 percent. The decision was widely expected, but the internal dynamics in the Open Market Committee were more revealing. Two members voted for an unchanged monetary policy, while the dot plot showed that six central bankers did not consider a rate cut to be appropriate at this time. In its joint projection, the Fed continues to signal only one additional rate cut in 2026, yet the labor market is cooling, revisions continue to point downward, and the upcoming rotation of personnel within the Fed means that risks continue to lean towards a looser monetary policy in the medium term. The reaction of the Bitcoin price was slightly negative, as the rate cut was largely priced in and the prospect of only one possible rate cut in 2026, according to the dot plot, put additional pressure on sentiment.
Kevin Hassett is still considered the clear favorite to succeed incumbent Fed Chairman Jerome Powell. He has repeatedly argued that there is considerable scope for interest rate cuts and has indicated that key interest rates below 3% are a plausible long-term target. He frames this as a growth-oriented agenda while emphasizing that the central bank must remain apolitical. Should he be appointed, and should the administration replace Lisa Cook with a similarly dovish voice, Trump appointees would dominate the Board of Governors.
(Author: James Butterfill, Head of Research)
