Powell Shakes Markets: December Rate Cut Unlikely as Fed Splits Deepen
Federal Reserve Chair Jerome Powell just threw cold water on Wall Street's favorite fantasy - sending shockwaves through traditional markets and crypto alike.
The Hawkish Reality Check
Powell's latest remarks suggest the Fed remains divided on monetary policy, with December rate cuts looking increasingly improbable. The central bank chief warned that inflation concerns continue to outweigh growth fears among policymakers.
Traditional Finance Tremors
As bond yields spike and equities wobble, digital assets face their own reckoning. Powell's stance reinforces the higher-for-longer interest rate environment that's been choking risk assets all year.
Meanwhile, over in crypto-land, traders keep betting on decentralized solutions to centralized monetary madness - because nothing says 'trust the system' like watching central bankers argue while holding your breath for their next move.
The Fed's internal divisions now threaten to create exactly the kind of policy uncertainty that drives investors toward Bitcoin's predictable scarcity. Sometimes the best monetary policy is no policy at all.
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On Wednesday, the Fed voted to cut rates by 25 bps, although two of the 12 voting members dissented. Fed Governor Stephen Miran favored a 50 bps cut, while Kansas City Fed President Jeff Schmid voted to keep rates unchanged.
December Rate Cut Odds Plunge
Powell added that today’s rate cut was a risk management move, although the decision in December will be influenced by the state of the labor market and inflation. Powell said that AI has contributed to layoffs and could hamper job creation in the future, although these effects have yet to show up in initial jobless claims data. In addition, he noted that the Fed has widely differing forecasts on data that will guide December’s decision.
Following Powell’s comments, the odds of a 25 bps rate cut in December on CME’s FedWatch tool plunged to 67% from 90.5%.
