Federal Reserve Cuts Rates by 25 Basis Points, Marking Third Reduction of 2025 Amid Dissent and Crypto Volatility
Fed Delivers Third Rate Cut of 2025 Despite Internal Dissent
The Federal Reserve announced a 25-basis-point reduction in its benchmark interest rate on September 17, 2025. This move marked the third rate cut of the year, ending months of market speculation and debate over the central bank's monetary policy trajectory. The decision, however, was not unanimous, highlighting significant internal divisions within the Federal Open Market Committee (FOMC).
According to reports, six members of the Fed would have preferred not to cut rates on Wednesday, suggesting a belief that the economy might not require further accommodation. This sentiment was echoed by external financial leaders, including Apollo Global Management (APO) co-founder and CEO Marc Rowan.
“There's no need for another rate cut from the Federal Reserve. The economy may be in a place where more rate cuts from the Fed aren't needed. There's nothing in the data that tells us that, but at the same time, I understand the decision,” Rowan told Yahoo Finance.
Market and Sector Impact: Bitcoin Plunges
The Fed's decision had immediate and pronounced effects across various asset classes. While rate cuts are typically viewed as supportive of risk assets, the cryptocurrency market reacted sharply. Since the September 17 rate cut, Bitcoin (BTC-USD) has experienced a significant downturn, dropping almost 25%.
This volatility has fueled speculation among crypto investors about whether the drop signals the start of “post-inflation deflation” or is merely a temporary market correction. The rate cut also prompted discussion about portfolio allocation, with some analysts suggesting investors consider shifting from money market funds toward active fixed income strategies in the new lower-rate environment.
Global Coordination and Forward Guidance
The Fed's action was mirrored by other major central banks, indicating a degree of coordinated monetary policy easing among developed economies. The Bank of England (BoE) also cut its rate by 0.25 percentage point, moving “in step with the Fed,” according to a report from The Wall Street Journal.
Looking ahead to 2026, the Fed remains deeply split on the path forward:
- Seven members of the Fed anticipate that no further rate cuts will be needed next year.
- Three members believe the central bank is now below the level needed on its benchmark policy rate.
This internal disagreement comes as the U.S. labor market shows “clearer signs of strain,” a factor that has historically justified monetary easing. Analysts suggest that while recent economic data, such as a cooling jobs report, supports the prior cuts made in 2025, it offers “little support for significantly deeper easing ahead.”
The market consensus, however, has been pricing in expectations for two rate cuts in 2026. This disconnect between the Fed's internal projections and market expectations suggests continued volatility and debate over the appropriate level of the federal funds rate moving forward. The focus remains on whether the Fed will continue to prioritize perceived fragilities in the labor market to justify further cuts in 2026, or if concerns over being below the neutral rate will prevail.
