Analysts expect multiple Federal Reserve cuts, boosting optimism for crypto and risk assets
Global banking institutions are revising their outlook for U.S. monetary policy, with consensus forming around at least two interest rate cuts in 2025. The shift follows a weaker-than-expected August jobs report and growing signs of a cooling labor market, fueling expectations that the Federal Reserve will ease rates to support growth.
Banking Forecasts on Fed Cuts
Bank of America, which previously expected no rate cuts in 2025, now projects two 25 basis point (BPS) reductions, scheduled for September and December. Meanwhile, Goldman Sachs economists see a more aggressive path, forecasting three 25 BPS cuts spread across September, October, and November.
Citigroup has issued a similar projection, pointing to a total of 75 BPS in cuts, also in 25 BPS increments during the final quarter of 2025.
Investor sentiment has quickly shifted in line with the banks’ forecasts. Data from the CME Group shows that 88% of traders expect a 25 BPS cut at the September Federal Open Market Committee (FOMC) meeting, while around 12% are pricing in a deeper 50 BPS move.
Lower borrowing costs typically fuel risk appetite by increasing liquidity. In the crypto sector, interest rate cuts are widely regarded as a bullish catalyst, driving demand for digital assets like Bitcoin and Ethereum.
The pivot comes amid signs of a weakening jobs market. The U.S. economy added only 22,000 jobs in August, well below the 75,000 expected. Additionally, revisions show June employment figures were cut by a total of 160,000 jobs, officially putting the labor market in contraction for that month.
Further downward adjustments are raising concerns. The Kobeissi Letter noted that 2024 job numbers were revised lower by 818,000, and warned that 2025 could see cuts of nearly 950,000 if the trend continues.
Fed Signals and Investor Outlook
Federal Reserve Chair Jerome Powell hinted at a possible September cut during his keynote speech at the Jackson Hole Economic Symposium in late August. Balancing the Fed’s dual mandate of maximum employment and stable prices, Powell acknowledged the need for flexibility as economic pressures build.
With the labor market softening and inflationary pressures stabilizing, major banks and traders now see rate cuts as inevitable in late 2025. For investors, particularly in the crypto sector, the shift signals the potential for renewed liquidity and extended bull market conditions into 2026.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.