The Federal Reserve is shifting towards a rate cut! Global capital enters a critical turning point

On September 18, 2025, the Federal Reserve made a major decision to cut interest rates by 25 basis points, lowering the interest rate range to 4.00% -4.25%. This measure broke the previous situation of five consecutive meetings without action and became the first major shift in monetary policy that year, attracting widespread attention in the global economic field. Its impact involves multiple important aspects such as the economy, politics, and markets.

1、 Behind the Decision: Finding a Difficult Balance between Employment and Inflation
The Fed’s interest rate cut this time is mainly due to clear signs of cooling in the labor market. In August, non farm employment only increased by 22000, far below market expectations, and the unemployment rate also rose to 4.3%, reaching a new high in nearly two years. At the same time, the inflation rate remains at 2.9%, higher than the target level of 2% set by the Federal Reserve.
The complex situation of slowing employment growth but still existing inflation has put the Federal Reserve in a dilemma. On the one hand, if interest rates are not cut, the economy may lose its growth momentum due to the sluggish job market; On the other hand, if the interest rate cut is too large, it may trigger further inflation. So, the Federal Reserve has adopted a strategy of “insurance style interest rate cuts”. Federal Reserve Chairman Powell emphasized after the meeting that this interest rate cut does not mean the beginning of an easing cycle.
According to the dot matrix released by the Federal Reserve, officials expect to cut interest rates by another 50 basis points this year, most likely in two installments in October and December. This “small steps, slow steps” approach to interest rate cuts reflects the Federal Reserve’s optimism and caution towards the economic outlook, attempting to find the best balance between stimulating economic growth and controlling inflation.
2、 Defending Independence: Professional Perseverance in Political Game
Behind the decision to cut interest rates this time, there is actually a political game hidden. Trump has repeatedly publicly pressured the Federal Reserve to cut interest rates more significantly. In this resolution, newly appointed Federal Reserve Governor Milan voted in favor of a 50 basis point rate cut, which is inconsistent with the views of most officials and is seen by many as a response to the White House’s stance.
However, most Fed officials still adhered to their professional judgment and maintained a moderate 25 basis point rate cut, which to some extent defended the independence of Fed decision-making.
Looking back at history, the Fed’s interest rate cuts can be divided into two types: “precautionary” and “relief”. The interest rate cuts in 1995 and 2019 were precautionary measures, successfully prolonging the expansion cycle of the US economy; The interest rate cuts in 2001 and 2008 were in response to the economic crisis and were passive measures. The current situation is closer to a “precautionary” interest rate cut, indicating that the Federal Reserve is adopting a preemptive strategy to try to avoid a hard landing in the US economy.
3、 Market response: The flow of funds is intertwined with risks and opportunities
As soon as the decision to cut interest rates was announced, the market immediately reacted, and the performance of different markets varied greatly. The US dollar index fell, gold prices first rose and then fell back, and the performance of the US stock market was also fluctuating. These reactions indicate that investors are re evaluating the value of risk assets.
Among numerous markets, the cryptocurrency market is particularly eye-catching. From historical data, periods of interest rate decline often coincide with bull markets in the cryptocurrency market. After the Federal Reserve cut interest rates in 2020 and 2024, the price of Bitcoin experienced a parabolic rise.
Currently, the size of US money market funds has reached a record high of $7.2 trillion. With the implementation of this interest rate cut, these low yielding funds may flow into high-risk asset sectors such as the cryptocurrency market in pursuit of higher returns.
Some financial institutions are also optimistic about the prospects of the cryptocurrency market. Coinbase’s research report suggests that the bull market for cryptocurrencies may continue in the fourth quarter; Derive’s analysts predict that the price of Bitcoin may rise to $140000 by the end of the year; The co-founder of BitMEX even believed that Bitcoin could rise to $200000. At the same time, funds have also flowed from Bitcoin to other cryptocurrencies such as Ethereum, and the total market value of these altcoins has increased by over 50% since July, indicating that the market’s tolerance for risk is increasing.
4、 Potential Risks: Inflation and Geopolitical Uncertainty
Although the market is optimistic about the prospects of risky assets such as cryptocurrencies, there are still some risks. Inflation may rise again due to fluctuations in energy prices, and geopolitical risks have not been fully priced by the market.
In the coming months, how the Federal Reserve can find a balance between promoting economic growth and stabilizing prices will be a major test of decision-makers’ wisdom. They need to closely monitor changes in economic data and flexibly adjust monetary policy according to actual situations.
5、 Future direction: Key meetings will reveal policy directions
The Fed’s interest rate cut this time is not just a simple adjustment, it also marks a new stage in the global economic cycle. For investors, the next step is to focus on whether the October Federal Reserve meeting will cut interest rates again. The outcome of this meeting will be key evidence for determining the true policy orientation of the Federal Reserve.
If the Federal Reserve cuts interest rates as scheduled in October, it means they will continue to adhere to the “small steps, slow steps” interest rate cut strategy; If the interest rate cut is suspended in October, it may mean that the Federal Reserve is somewhat concerned about the prospects of the US economy and needs to further observe the economic situation before making a decision.
The Federal Reserve’s interest rate cut in September was a complex decision made amidst multiple intertwined factors such as the economy, politics, and markets. It reflects both the Federal Reserve’s assessment and response strategies to the current economic situation in the United States, as well as their efforts to maintain decision-making independence and balance the interests of all parties. For investors, closely monitoring the subsequent policy movements and market reactions of the Federal Reserve, and adjusting their investment portfolios reasonably will be the key to dealing with future economic uncertainty.