The odds are climbing that the U.S. Federal Reserve will deliver a second - and possibly third - interest rate cut before the year is out, as investors digest fresh signs of slowing inflation.
The growing conviction among traders has sparked a wave of optimism across the crypto market, which has already begun to price in looser monetary policy.
Markets Shift After Softer Inflation
The latest Consumer Price Index (CPI) report confirmed what many on Wall Street had hoped for: inflation continues to cool. September’s figures showed annual price growth easing to 3%, slightly below expectations. The news immediately sent rate-cut bets soaring, with prediction platforms like Polymarket now showing over 80% probability that the Fed will reduce rates twice more this year.
The first move is widely expected to come at the October 28-29 FOMC meeting, where analysts anticipate a 25-basis-point cut. According to CME FedWatch, traders are nearly unanimous – pricing a 96% likelihood that the Fed will move next week. A follow-up cut in December is now seen as the final step in a policy shift aimed at preventing a deeper economic slowdown.
Fed Faces Pressure to Act
Inside the central bank, officials appear split but increasingly open to easing. Chris Waller, one of the Federal Reserve governors, has signaled support for two modest cuts, while Stephen Miran has gone further, urging a single, sharper 50-basis-point move to “get ahead of the curve.”
Meanwhile, macro analysts say the Fed’s room for maneuver is shrinking. The Kobeissi Letter, a well-followed market commentary outlet, argued this week that “the data leaves no alternative” – pointing to a weakening job market and fading inflation as reasons the Fed must act.
Crypto Market Eyes Extended Bull Run
For crypto traders, falling interest rates are rocket fuel. Lower borrowing costs tend to drive demand for risk assets, and Bitcoin’s rally above $126,000 earlier this month is seen as proof that markets are already anticipating the Fed’s next step.
Market strategist Fred Krueger said that the upcoming cuts could extend the current bull market beyond traditional four-year cycle expectations. “The structure is changing,” he wrote. “Macro policy is becoming the biggest driver, not the halving.”
Some investors see parallels between today’s environment and the 2020-2021 cycle, when aggressive monetary easing sent both equities and crypto to record highs.
Not Everyone’s Convinced
Still, warnings are emerging that the optimism might be overdone. Veteran trader Peter Brandt cautioned that Bitcoin could face a sharp pullback, comparing its current chart formation to the 1977 soybean collapse – a historical reminder that parabolic rallies rarely end smoothly.
Others note that while rate cuts can boost liquidity, they often coincide with economic weakness. “You can’t cheer looser policy without acknowledging why it’s happening,” one analyst said, suggesting that persistent softness in manufacturing and employment could limit upside momentum.
Looking Ahead
The coming FOMC meeting is now shaping up as a defining moment for global markets. If the Fed confirms a new easing cycle, crypto could find itself in the crosshairs of another liquidity-driven boom.
But beneath the excitement lies a deeper question – whether the same monetary relief that lifts digital assets will also signal that the broader U.S. economy is still too fragile to stand on its own.
