Fed Chair Powell Signals Rate Cut, Bitcoin Rebounds Above $112K

Federal Reserve Chair Jerome Powell adopted a dovish tone on monetary policy, citing growing risks in the U.S. labor market and signaling the likelihood of another interest rate cut at this month’s FOMC meeting. The remarks sparked a rebound in Bitcoin (BTC) price, which rose above $112,000 amid renewed market optimism.

Speaking at the Annual Meeting of the National Association for Business Economics, Powell said:

“Based on the data we have, the outlook for employment and inflation does not appear to have changed much since our September meeting. Downside risks to employment appear to have risen.”

Bitcoin Responds to Fed’s Dovish Shift

The FOMC minutes revealed that the first rate cut last month was prompted by a weakening labor market. The latest remarks of the Fed Chair reinforced market expectations of another cut, boosting BTC trading from a low of $110,000 earlier in the day to around $112,800 at the time of writing, according to TradingView.

Earlier this month, Bitcoin surged to a new all-time high (ATH) above $126,000, as traders anticipated the potential October rate cut.

“Monetary policy is more effective when the public understands what the Federal Reserve does and why,” Powell said, adding insights about the Fed’s balance sheet and its critical role during periods of economic stress.

Fed Balance Sheet: From Pandemic to Policy Normalization

Powell highlighted the Fed’s efforts to stabilize the financial system during COVID-19 through large-scale asset purchases. He noted: “Our ample reserves framework has proven highly effective, delivering good control of our policy rate while promoting financial stability and supporting a resilient payments system.”

He indicated that the Fed may soon stop shrinking its balance sheet, signaling a potential shift from quantitative tightening to easing in the coming months. This dovish tilt is expected to increase liquidity, supporting risk assets such as Bitcoin.

Labor Market Concerns and Inflation Outlook

Fed Chair Powell stressed that while the unemployment rate remains low, payroll gains have slowed due to declining labor force growth. Core PCE inflation remains near the Fed’s target at 2.9%, driven primarily by goods prices rather than broad inflationary pressure.

The Fed’s careful assessment of employment and inflation suggests a continued flexible approach to monetary policy, balancing the risks to both the labor market and price stability.

Market Implications

Investors are pricing in further rate cuts amid Powell’s dovish stance, contributing to Bitcoin’s rebound above $112K. If implemented, additional easing and the stabilization of the Fed’s balance sheet could further boost liquidity in the crypto market, providing tailwinds for both digital assets and broader financial markets.