Fed Insists Interest Rates Must Be Cut: What Impact on the Economy and Crypto Market?

Jakarta, Pintu News – Michelle Bowman, Vice Chair of Supervision at the Federal Reserve (Fed), reiterated her stance on pushing for interest rate cuts. In an interview with Bloomberg News on August 19, 2025, Bowman stated that her views have not changed since she and Christopher Waller became two of the few dissenting FOMC members at the July meeting.

Bowman insisted that economic conditions favored a rate cut, even though the majority of Federal Reserve members still maintained interest rates in the range of 4.25% to 4.5%. Their rejection comes amid strong pressure from the White House who wants an easing of monetary policy.

What prompted Bowman to cut interest rates?

Bowman and supporters of a rate cut point to weakening US employment data. The July 2025 employment report showed only 106,000 jobs were created since May – a much weaker figure than expected. Although unemployment remains low at 4.2%, this data raises concerns about potential stagnation.

Some economists, such as Seema Shah of Principal Asset Management, call this phenomenon part of the “new normal” due to strict immigration policies. She emphasizes that the slowdown in hiring is not necessarily a sign of recession, but rather due to a limited supply of labor.

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Did Trump Play a Role in the Change in Policy Direction?

President Donald Trump has launched a campaign to pressure the Fed to lower interest rates, as part of a strategy to maintain purchasing power amid price pressures. In early August, Fed Board of Governors member Adriana Kugler resigned and was replaced by Stephen Miran, Chair of the White House Council of Economic Advisers who is seen as more supportive of Trump’s policy direction.

This strengthened speculation that future monetary policy will be more expansionary. The market responded. According to CME Fed Watch, the chance of a rate cut in September reached 83%, although the volatility of predictions increased due to uncertainty in inflation and employment data.

What does this have to do with Financial Markets and Crypto?

Interest rate cuts tend to make risky assets, including cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH), more attractive as they lower bond yields. This encourages investors to seek profits elsewhere. However, if the cut is made while inflation is still high, as it is now, the risk of market overheating remains.

In the context of crypto, price rallies often follow monetary policy easing. When investors see the potential for cheap money coming back into the market, capital flows into digital assets tend to increase. Therefore, Bowman’s stance could be an early signal for crypto market participants to prepare for big moves in the short term.

What are the Regulatory Changes being discussed?

In addition to interest rates, Bowman also highlighted the Fed’s new proposal on the leverage ratio and the Basel III regulatory framework. He stated that the Fed plans to resubmit the proposal in early 2026 to improve the safety of the banking system after the 2008 financial crisis.

As for the leverage ratio, the proposed changes allow large bank subsidiaries to reduce capital requirements by up to 27%. Although the Fed claims this will encourage the purchase of US bonds, some Democratic members of the Senate warned that this rule could encourage banks to be more aggressive in lending, and increase systemic risk.

What’s the Takeaway for Investors?

Bowman’s stance suggests that the internal debate at the Fed is intensifying regarding the direction of monetary policy. Investors, both in the stock and crypto markets, will need to keep a close eye on upcoming economic data and Jerome Powell’s speech at the Jackson Hole symposium this week.

For the crypto market, dovish signals from key members of the Fed could be a short-term catalyst. However, as always, interest rate policy should be viewed in the context of broader macro data so that investors don’t get caught up in momentary euphoria.

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This content aims to enrich readers’ information. Pintu collects this information from various relevant sources and is not influenced by outside parties. Note that an asset’s past performance does not determine its projected future performance. Crypto trading activities are subject to high risk and volatility, always do your own research and use cold hard cash before investing. All activities of buying andselling Bitcoin and other crypto asset investments are the responsibility of the reader.

Reference:

• Tobias Burns / The Hill. Fed’s Bowman doubles down on her dissent. Accessed August 20, 2025.