Bitcoin suffered significant setbacks toward the end of December, following the Federal Reserve’s restrictive stance on interest rates for 2025. The Fed made it clear that multiple interest rate cuts this year are unlikely. Yesterday, Philip Jefferson, Vice Chair of the Federal Reserve, reinforced this message.
No Rush for Interest Rate Cuts
Jefferson emphasized that the Fed is in no hurry to lower interest rates. This stance makes sense to some extent, given that the economy remains stable, and inflation is still a pressing issue.
“As long as the economy and labor market remain strong, I believe it is appropriate for the Federal Reserve to be cautious with adjustments (i.e., rate cuts),” Jefferson stated.
However, in the medium term, he expects that rate cuts will eventually be necessary. This signals that the current interest rate levels are restrictive, meaning they are actively slowing economic activity.
At the moment, however, Jefferson believes this restrictive stance is necessary to fully control inflation.
“That being said, I see no reason to rush into changing our interest rate policy,” he added.
Fed Vice Chair Phillip Jefferson (part of Powell's inner circle) makes even more clear that cuts aren't a part of the near-term base-case.
Lower rates are the most likely outcome "over the medium term."
"That said, I do not think we need to be in a hurry to change our stance." https://t.co/NbCF72bm4L
— Nick Timiraos (@NickTimiraos) February 5, 2025
What Does This Mean for Bitcoin?
First and foremost, it means that the Federal Reserve is making decisions strictly based on economic data.
If the U.S. job market turns out to be significantly weaker than expected this week, the Fed might suddenly shift toward more aggressive rate cuts.
For Bitcoin, the Fed’s reluctance to cut rates isn’t necessarily bad news. It indicates that the U.S. economy remains stable and that there is no immediate recession risk—a solid foundation for Bitcoin’s bull market.
In the short term, however, markets seem less thrilled with the Fed’s cautious stance.
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