Fed Chair Jerome Powell’s statement that a December interest rate cut is “far” from certain has stirred financial markets. The US Dollar Index (DXY) surged to its highest level since August. Meanwhile, major cryptocurrencies suffered declines despite the Fed’s latest rate reduction.

This reaction, described by analysts as a “hawkish cut,” suggests the Fed aims to temper expectations for further monetary easing. The differing moves across asset classes highlight uncertainty about the economic outlook as October 2025 ends.

Understanding the Fed’s Hawkish Rate Cut Phenomenon

On October 29, BeInCrypto reported that the central bank lowered its benchmark interest rate by 25 basis points. Moreover, the Fed revealed that it will end quantitative tightening (QT) on December 1, a major bullish sign for the crypto markets.

Despite this, investor sentiment has worsened rather than improved. According to the latest data from BeInCrypto Markets, the crypto market is down 2% over the past 24 hours, with all top 20 coins in the red. Bitcoin (BTC ($110,348.00)) has slipped below the $110,000 mark, while Ethereum (ETH ($3,876.37)) has also lost the $4,000 mark.

“On-chain metrics show weakening institutional demand. The Coinbase Premium Gap — which tracks the price difference between Coinbase and other exchanges — turned negative again, signaling fading US buying activity. Historically, a declining premium often precedes short-term corrections. Retail traders cheered the macro headlines, but large players stayed cautious,” an analyst highlighted.

At the same time, DXY climbed to 99.7 points yesterday, its highest since August 2025. Technical analysts note that this could be a turning point, with the dollar showing a potential shift from bearish to bullish territory.

Investors typically expect lower interest rates to support riskier assets. However, this time, the strengthening dollar has put renewed pressure on crypto markets. The opposing trends deepen worries about the current market environment.

The reason for this shift lies in the accompanying message. Powell’s remarks dampened hopes for immediate further easing. According to an official statement, he emphasized that another reduction in December is uncertain.

“There were strongly different views about how to proceed in December. A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it,” he said.

Market probabilities responded quickly to the Fed’s tone. According to the CME FedWatch Tool, the odds of a December rate cut fell from over 90% to 70.8%.

Fed Rate Cut Expectations in December. Source: CME FedWatch Tool

According to an analyst, this approach is a deliberate attempt to guide market sentiment. This strategy aims to manage inflation expectations and maintain policy flexibility.

“A ‘hawkish cut’ isn’t a paradox, it’s a strategy. It’s when we see a rate cut but a dampening of expectations for future easing,” Milk Road Macro explained.

Recession Warnings Emerge Amid Policy Shifts

Meanwhile, several analysts are warning of mounting economic challenges. According to The Kobeissi Letter, around 82% of the US population now lives in areas experiencing a recession — the highest level recorded since 2020.

“The percentage has DOUBLED since the start of 2025. Over the last 20 years, only 2008 and 2020 saw such a large share of the country in recession. Meanwhile, the latest Atlanta Fed estimate for real US GDP growth in Q3 2025 is +3.9%,” the post read.

Additionally, another analyst observed that long-term unemployment has climbed to 25.7%. She explained that roughly one in four individuals in the US has been out of work for more than 27 weeks.

“The last time this number breached 25%? 2009. A full year into the recession. Yes, that one. Is that clear enough on why I don’t believe the 4.35% unemployment rate?” Amanda Goodall stated.

Thus, the Fed’s careful messaging appears to strike a balance between supporting growth and lowering borrowing costs, while also working to prevent bubbles or a spike in inflation expectations if a recession materializes.

Traders remain cautious, waiting for fresh data and the Fed’s next moves as its December meeting approaches. The outcome will hinge on growth, inflation, and employment trends in the coming weeks. Ultimately, as markets absorb the Fed’s strategy, the tension between policy moves and messaging will likely continue to drive volatility.

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