Fed Cuts Interest Rates One Last Time in 2025

Fed cuts interest rates one last time in 2025, signaling continued monetary easing and a hawkish stance for 2026. See how the market reacted and what’s next.

Fed Cuts Interest Rates One Last Time in 2025 with a Hawkish Outlook for 2026

In its December 11, 2025 meeting, the Federal Reserve (Fed) announced what could be its final interest rate cut of the year. This decision marked the third consecutive reduction in 2025, moving the target federal funds rate to 3.50%–3.75%.

Markets had largely anticipated the move, and cryptocurrencies like Bitcoin had already shown strength leading up to the announcement. Despite that, there was only mild price reaction after the official Fed release.

Let’s break down what happened, why it matters, and what it could mean for investors in 2026.

What Happened at the December Fed Meeting?

During the late-night meeting (U.S. time) on December 11, the Fed announced a 0.25% interest rate cut. This follows earlier reductions in September and October.

The new rate range of 3.50%–3.75% represents a cumulative cut of 0.75% from the 4.25%–4.50% band seen earlier in the year.

However, this reduction was not unanimously supported. Three policymakers voted against the decision — the first such dissent since 2019. The split highlights ongoing debate within the Fed about inflation risks and the strength of the U.S. economy.

Despite this, most officials signaled openness to one more rate cut in 2026, with target ranges possibly falling to:

• 3.25%–3.50% or

• 3.00%–3.25%

These projections suggest the Fed retains a somewhat hawkish tone moving into next year.

What Fed Policy Signals Mean for Markets

Aside from the rate cut, the Fed also introduced a short-term quantitative easing (QE) program. This means it will buy back $40 billion in Treasury bonds per month — but only for a few months, not on an open-ended basis.

At the press briefing, Fed Chair Jerome Powell offered key points:

• The Fed is examining more economic data before deciding on further moves.

• U.S. GDP growth was revised up to 2.3%, up from 1.8% in September.

• Inflation remained at 2.8%, above the Fed’s long-term 2% target.

Powell also suggested that previous tariff policies had one-time inflationary effects, but the Fed is monitoring broader conditions carefully.

Market & Crypto Reaction

Because this rate cut was widely anticipated, major markets — including stocks and crypto — showed muted response immediately after the announcement.

Before the decision, Bitcoin climbed from roughly $89,000 to over $94,000, likely reflecting traders pricing in the expected rate change. After the Fed news, BTC softened slightly to under $91,000.

Major altcoins displayed similar patterns, indicating that traders may have “priced in” the news ahead of time rather than reacting afterward.

What’s Next — 2026 and Beyond

Several important trends are emerging:

A Hawkish 2026 Outlook

Even with rate cuts, the Fed’s language suggests caution, not aggressive easing. Inflation still sits above target, and the labor market shows mixed signals.

This means markets may not get a big liquidity boost early next year — especially if inflation doesn’t fall faster.

Fed Leadership & Policy Predictions

Federal Reserve Chair Jerome Powell’s term ends in May 2026. Despite pressure from political leaders to remove him, he is expected to complete his term.

U.S. political forecasts and prediction markets (e.g., Polymarket) currently point toward Kevin Hassett as a favored candidate to succeed Powell.

Additionally, markets now place roughly 80% probability on no rate cut at the January 2026 meeting. This further reinforces the idea that 2025’s final cut may indeed be the last for a while.

Conclusion — Pricing in the Future

The Fed’s December 2025 rate cut was largely priced into global markets, especially crypto. Bitcoin and major altcoins showed price strength before the news and steady behavior afterward.

Looking forward, the Fed’s cautious — yet slightly hawkish — stance means that interest rates may remain higher for longer than some investors expected.

As always, volatility persists. Investors should keep a close eye on economic data and policy guidance in 2026 to understand how macro conditions will shape market performance across different asset classes.

Disclaimer

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