Powell’s December Shock: Fed Cuts Rates, But Hawkish Powell Guidance on December Spooks Investors; Bitcoin Slides

Powell’s December Shock: In line with previous guidance and market expectations, the U.S. Federal Reserve lowered its benchmark interest rate by 25 basis points, setting a new target range of 3.75%–4.00%. The decision, widely anticipated by analysts, reflects the central bank’s continued attempt to balance inflation concerns with slowing economic growth. However, the financial markets reacted unpredictably—Bitcoin initially fell before recovering sharply following Chair Jerome Powell’s remarks.

 

During his post-meeting press conference, Powell emphasized caution regarding future monetary easing. He noted that “a further reduction in the policy rate at the December meeting is not a foregone conclusion: far from it.” His reluctance to commit to another rate cut unsettled some investors who had hoped for a clearer dovish stance.

Economic Conditions and Fed Outlook

According to the Fed’s accompanying statement, U.S. economic activity has been expanding at a “moderate pace,” though job growth has slowed, and unemployment has ticked slightly higher. Inflation, meanwhile, “remains somewhat elevated.” The statement stopped short of identifying specific drivers of inflation, but the overall message was one of persistent uncertainty.

Powell reiterated the central bank’s dual mandate—maximum employment and price stability—stressing that risks remain on both sides. He warned that inflationary pressures could prove more persistent than expected, while the risks to employment have “risen in recent months.” The chair acknowledged that policymakers are walking a tightrope between supporting growth and preventing an inflation rebound.

The Fed also announced that it would halt the reduction of its securities holdings starting December 1, signaling a modest easing of financial conditions. This move is intended to inject more liquidity into the system, supporting credit markets and overall economic stability.

Market Reaction and Bitcoin’s Volatility

Financial markets showed a muted reaction at first. Bitcoin and spot gold both slipped 0.4% shortly before Powell’s remarks, while U.S. equities remained largely unchanged. However, as the press conference continued, Bitcoin’s price plunged nearly 2% within five minutes, dropping below $110,000 according to TradingView data. Spot gold mirrored this decline.

Later, as Powell clarified that the Fed remained open to further easing if warranted by economic conditions, Bitcoin rebounded, reflecting investors’ renewed appetite for riskier assets amid potential lower yields.

Political and Internal Pressure

The decision was not unanimous. Powell faced dissent from within the Federal Open Market Committee (FOMC), with a 10–2 vote split—an uncommon occurrence that underscores growing division within the central bank. One notable opponent was Stephen Miran, a recent Trump appointee to the Fed Board, who argued for a larger 50-basis-point cut to better support growth.

Miran’s position aligns with the White House’s pro-growth stance, advocating for cheaper borrowing costs to counteract economic headwinds and trade-related disruptions. The Trump administration’s tariff policies have been a recurring theme in monetary debates, with Powell clarifying that tariffs are not the main source of inflation. He explained that while tariffs can temporarily push up prices, the effects are generally delayed and limited in scope.

“There will be some additional increase in inflation because it takes a while for tariffs to work through the production chain and finally reach consumers,” Powell said. He added that “non-tariff inflation”—inflation unrelated to trade measures—is already hovering near the Fed’s 2% target.

Meanwhile, other members, such as Jeffrey R. Schmid from Kansas, argued that rates should remain steady to avoid overstimulating the economy. This division illustrates the growing tension between those prioritizing inflation control and those emphasizing employment and growth.

Looking Ahead

As the Fed navigates a complex economic landscape—marked by trade disputes, uneven labor data, and volatile markets—Powell’s leadership faces mounting scrutiny. With inflation still slightly above target and unemployment beginning to rise, the path forward remains uncertain.

Investors are now closely watching incoming data and Fed communications ahead of the December FOMC meeting, where policymakers will decide whether to resume rate cuts or pause to assess the effects of their recent moves.

For now, Powell’s message is clear: the Fed is proceeding with caution. While markets may crave more aggressive easing, the central bank appears determined to maintain flexibility—ensuring that future decisions are guided by evolving economic realities rather than market pressure.