The Federal Reserve has cut interest rates by 25 basis points in September 2025, lowering the target range to 4.00–4.25%. This decision, led by Chair Jerome Powell, was primarily motivated by concerns over a weakening labor market despite persistently elevated inflation. Powell stated: "The committee was trying to balance the risks in its dual mandate but also noted that there is no ‘risk-free path’ for setting rates. The change in the labor market since the last meeting was the catalyst for the Fed to cut rates despite inflation remaining elevated."
This rate cut is expected to influence major cryptocurrencies including Ether (ETH), XRP, Solana (SOL), Cardano (ADA), Dogecoin (DOGE), and Shiba Inu (SHIB). Lower interest rates typically reduce the opportunity cost of holding non-yielding assets like cryptocurrencies, potentially driving increased investment as investors seek higher returns. Historical data from 2019-2020 suggests that previous Fed rate cuts have correlated with crypto market rallies and increased DeFi activity.
However, the move has generated mixed reactions. BitMEX co-founder Arthur Hayes warned: "Upcoming interest rate cuts by the U.S. Federal Reserve could trigger a major downturn in the crypto market," highlighting potential volatility. Meanwhile, analysts like Dan Tapiero noted that XRP has shown strong performance in derivatives markets following the announcement. The immediate market impact appears cautious, with institutions yet to make significant capital shifts despite slightly adjusted borrowing costs.
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