From October 28–29, 2025, the Federal Reserve held its policy meeting and announced its second rate cut of the year, lowering the federal funds target rate by 25 basis points—from 4.00%–4.25% to 3.75%–4.00%. This decision confirms that the Fed is moving from “pause” to “gradual easing,” following the first cut last month.
History of Rate Movement
The first rate cut of the year came in September, from 4.25%-4.50% down to 4.00%-4.25%.
The October move brings the range to 3.75%-4.00%, the lowest since December 2022.
What the Fed Considers Before Cutting Rates
Inflation Rate
The Federal Reserve closely monitors inflation with an eye toward its ~2% long-run goal. In the most recent report, the Consumer Price Index (CPI) increased by 3.0% year-over-year in September 2025, and rose 0.3% on a monthly basis. The core inflation measure (excluding food and energy) also rose about 3.0% annually, while month-to-month it increased by just 0.2%. Although inflation has cooled from its 2022 peaks, it remains above target, giving the Fed reason to continue easing policy in a controlled manner.
Economic Growth
The broader economy shows signs of slowing momentum. Consumer spending remains resilient, but business investment and manufacturing output have weakened. The ongoing government shutdown has disrupted data releases, making it harder to assess real-time growth trends. Early estimates suggest GDP growth slowed to around 1.5–1.8% (annualized) in Q3 2025, reinforcing expectations for a softer landing rather than a full-scale recession.
Employment Levels
Labor market conditions have softened. The unemployment rate stood at 4.3% in August 2025, and job creation has slowed to roughly 22,000 new positions, well below early-year averages. Labor-force participation has flattened, and the share of long-term unemployed rose to 25.7% of total unemployment. Fed officials, including Governor Christopher Waller, have highlighted rising employment risks as justification for further easing to support labor demand.
Global Economic Conditions
Trade frictions, slowing global growth, and financial tightening abroad continue to weigh on U.S. exports and manufacturing. With limited fresh domestic data due to the shutdown, the Fed is monitoring global indicators more closely, particularly in Europe and Asia, where growth has also moderated.
New Opportunities for Crypto Investors
The Federal Reserve’s decision to cut interest rates is sparking renewed optimism in financial markets, and crypto is no exception.
Lower rates make borrowing cheaper and saving less attractive, prompting both institutional and retail investors to shift capital into higher-growth assets. Historically, rate cuts have been bullish for crypto, with increased demand for assets like Bitcoin, Ethereum, and others.
To understand how the Federal Reserve's interest rate decisions impact you, click below:
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