Key Takeaways
- The Fed cut rates by 25 basis points to 3.75–4%, its second reduction this year.
- Quantitative tightening will end by December 1, signaling a shift in the Fed’s liquidity stance.
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The Federal Reserve cut the federal funds rate by 25 basis points, bringing the target range down to 3.75–4%, in line with market expectations. Equities reacted mildly to the move, with the S&P 500 and Nasdaq both up 0.2% at the time of writing as traders had largely priced in the decision.
Ahead of the decision, Bitcoin and the broader crypto market traded lower as investors positioned cautiously. At the time of the rate cut, Bitcoin held steady near $111,300, while Ethereum hovered just below $4,000.
This marks back-to-back 25 basis point cuts in September and October, the second rate reduction of the year. The CME FedWatch Tool indicates that markets are now pricing an 87% probability of another 25-basis-point cut by December, which would bring the total to three consecutive reductions in 2025.
More notably, the Fed confirmed that quantitative tightening will conclude by December, stating, “The Committee decided to conclude the reduction of its aggregate securities holdings on December 1”.
The statement emphasized that the central bank remains committed to its dual mandate of maximum employment and price stability, noting that economic activity continues to expand moderately while inflation remains somewhat elevated.
Traders are now awaiting comments from Fed Chair Jerome Powell, set to speak in the next few minutes, for further guidance on the central bank’s policy outlook.
