Powell's strategic speech reshapes market expectations as the Fed cuts rates

Federal Reserve Chair Jerome Powell delivered a crucial speech during Thursday’s rate decision announcement, dispelling uncertainties about the future direction of monetary policy. In his remarks, Powell clarified that recent election results “do not influence” the Fed’s short-term decisions, a message aimed at reassuring market participants concerned about possible inflation accelerations stemming from the proposals of the newly elected president. This speech marked a turning point in central bank communication, as it directly addressed the geopolitical tensions surrounding the institution.

The Meeting Context and the Rate Decision

As widely expected by market analysts, the Federal Reserve lowered the federal funds rate by 25 basis points, bringing it to the 4.5%-4.75% range. This move continues the easing of monetary policy initiated at the previous September meeting, when the Fed cut rates by 50 basis points. In the official statement, the U.S. central bank emphasized that “since the beginning of the year, labor market conditions have generally softened, and the unemployment rate has increased, although it remains at historically low levels.” Regarding inflation, the institution acknowledged significant progress toward the 2% target, while noting that price pressures remain above the set goals.

During Powell’s press conference, the chairman highlighted that monetary policy still maintains a restrictive stance despite today’s easing. He also pointed out that downside risks to economic growth have decreased compared to previous conditions. When asked about the possibility of voluntary resignations at the request of the new president-elect, Powell clearly stated that “this is not permitted by law,” reinforcing the Federal Reserve’s independence from external political pressures.

Coordinated Response from Global Central Banks

The international context showed coordination in interest rate cuts. The Bank of England also reduced its benchmark rate by 25 basis points on the same day, aligning with the U.S. decision. Simultaneously, the Swedish Riksbank implemented an even more aggressive easing, cutting key interest rates by half a percentage point. This synchronization in global monetary policy reflects a convergence in assessments of the international economic cycle.

Bitcoin and Crypto Market Rally Follow Powell’s Speech

Crypto markets reacted immediately and decisively to Powell’s speech. Bitcoin surged to $76,951, setting a new all-time high during the Fed meeting. Although the price later dipped slightly from intraday peaks, the leading cryptocurrency still closed the session up 1.6% over 24 hours. Current data shows Bitcoin trading around $68,570, reflecting a consolidation after the initial strong rally, with a 4.67% increase in the last 24 hours.

The CoinDesk 20 index, which tracks the top crypto market caps, outperformed significantly, gaining 4.5% in the same period, surpassing Bitcoin’s performance. This suggests that altcoins, especially assets like Ethereum, Solana, Dogecoin, and Cardano, responded even more enthusiastically to Powell’s dovish tone. Major U.S. stock indices also moved positively, with the S&P 500 up 0.8% and the Nasdaq rising 1.5% during the day, indicating widespread market optimism about the Fed’s decision.

Technical Analysis and Outlook After Powell’s Speech

Market participants have begun reassessing expectations for the upcoming December Fed meeting. The probability of a further rate cut in the next session has decreased to 28% from 33%, according to CME FedWatch, suggesting Powell’s speech has tempered expectations of an aggressive easing in the near future.

Technical analysis indicates that the movement of Bitcoin and altcoins was at least partly driven by a short squeeze, where bearish positions were forced to cover. Joel Kruger of LMAX Group urged caution regarding the sustainability of this rally, noting that the rebound could mainly be a technical correction rather than the start of a new structural trend. Joshua Lim of FalconX observed that some funds are following the upward move, reallocating capital into highly volatile assets and options strategies.

Key technical levels for Bitcoin remain around $72,000 and $78,000. For Powell’s speech and the Fed’s decision to translate into a strong, sustained bullish trend, the price must convincingly break through these resistance levels, signaling a shift from tactical to strategic market movement.

Powell’s strategic communication has thus set the tone for the coming weeks, with markets awaiting further macroeconomic developments and additional statements from the U.S. central bank.