3 min de lectureIn the coming week, we will hear from a number of Federal Reserve officials following their recent decision to resume rate cuts. These remarks will be closely scrutinised for insight into how individual FOMC members assess the balance of risks, particularly after signalling a central projection of two further 25bp cuts this year and one more in 2026.
On the data front, durable good data came in much higher than expectations, reigniting the inflation debate and pushing digital asset prices down as a consequence as interest rate expectations became mildly more hawkish. The main highlight will be Friday’s release of the core PCE deflator – the Fed’s preferred measure of inflation. While core CPI printed a relatively hot 0.3% MoM, the PCE measure was softer at 0.2% MoM and 2.9% YoY, helped by a lower housing weighting and the influence of PPI inputs such as airfares and healthcare. Such an outcome would effectively give the green light to additional cuts in October and December.
Fed expected to continue its policy
Our base case is that the Fed ultimately cuts rates more than they currently suggest. We expect 25bp moves in October and December, followed by further reductions in January and March, at which point policymakers are likely to pause and reassess. Inflation remains above target and tariffs will keep it sticky in the near term, but the backdrop is shifting: consumer demand is cooling, the labour market is softening, and the drivers that pushed inflation to 9% in 2022 – soaring energy, rents and wages – are absent. If anything, these forces now lean disinflationary, and as this becomes more evident in the final months of this year, it is likely to provide support for bitcoin prices in particular.
A gradually cooling economy, combined with rising unemployment, points to inflation drifting back toward 2% by end-2026. Meanwhile, the mix of lower borrowing costs, a weaker dollar and reduced uncertainty on trade has the potential to stabilise business sentiment and lay the groundwork for stronger growth into 2026.
Digital assets have so far reacted cautiously to the “hawkish cut” rhetoric, with US$235m in outflows this week underscoring that sentiment. We interpret the recent correction primarily as a deleveraging shakeout following the Fed meeting, with roughly US$2bn unwound since the FOMC decision. Crucially, the longer-term fundamentals of a dovish Fed and the potential for a disinflationary environment remain intact. Looking ahead, anticipation around the prospective SOL and XRP ETF launches in the US is likely to fuel renewed momentum, and despite outflows from Bitcoin and Ethereum this week, we continue to see persistent daily inflows into both SOL and XRP.
A cautious first rate cut
Bitcoin has reacted cautiously to the Federal Reserve’s first rate cut since December, with prices holding flat over the past three months and volatility compressing to around 26%. Unlike previous easing cycles, this move has not produced a sharp breakout, suggesting that markets do not view the Fed’s pivot as a clear inflection point. Futures markets still toy with the idea of three cuts this year, but the subdued response indicates investors remain uncertain about the depth and durability of the easing cycle. For now, Bitcoin’s price action reflects a market waiting for clarity on whether this is the start of a sustained dovish turn or simply a modest recalibration.
A stronger confirmation is needed
The Fed lowered the federal funds target range by 25 basis points to 4.0%–4.25%, a widely expected move, with new Governor Stephen Miran dissenting in favor of a larger 50-bp cut. In the updated dot plot, the median participant now projects an additional 50 bps of cuts this year — more than in the last version — while maintaining the path of 25-bp reductions in both 2026 and 2027. Yet the distribution of projections underscores significant disagreement within the committee: nine participants anticipate two further cuts in 2024, two expect only one, six see none at all, and one projects as much as 125 bps of easing in 2025. One dot even implied higher rates by year-end, interpreted as a “silent dissent” likely from Cleveland Fed President Beth Hammack.
The Summary of Economic Projections added to the mixed picture. While policymakers raised their growth estimates for 2025 and lowered unemployment forecasts, they also flagged greater downside employment risks and acknowledged that core inflation is likely to remain persistently higher than previously expected. This combination creates a policy paradox: officials foresee stronger growth and tighter labor markets, yet still signal the need for more cuts. We interpret this as the Fed adopting a more dovish reaction function, easing policy despite lingering inflation concerns. For Bitcoin, this shift underscores its role as a hedge against monetary debasement — but the muted market response shows investors are still waiting for stronger confirmation that the Fed is embarking on a sustained easing cycle.
