The Federal Reserve, under the leadership of Chair Jerome Powell, has announced a significant shift in its monetary policy, focusing on the labor market and tying decisions to employment data.
Change in Fed Monetary Policy
At the Jackson Hole conference on August 22, 2025, Jerome Powell announced a revision of the Fed's monetary policy with an emphasis on the labor market. Decisions will now be directly connected to employment data, marking a departure from previous inflation-centered strategies. This policy aims to support economic stability.
Expectations for Interest Rate Cuts
The new announcement has led to increased expectations for a rate cut by September 2025, impacting financial forecasts across various sectors. Analysts believe that potential rate cuts could stimulate economic growth by reducing borrowing costs. Historically, rate reductions have boosted market confidence and liquidity.
Impact on Crypto Market
Crypto markets may experience increased activity due to the potential for favorable economic conditions. Lower rates traditionally benefit risk assets, including Bitcoin and Ethereum. Anticipated liquidity inflows from such policy shifts could support these markets and boost investor confidence. The Fed's policy focus could lead to a revival in DeFi activities with potential increases in total value locked in protocols.
The Fed's change in monetary policy, focusing on the labor market, may signify a pivotal move towards interest rate cuts, affecting not only traditional financial markets but also cryptocurrency assets.
