On July 31, 2025, the Federal Reserve announced it would maintain the federal funds rate at 4.25%-4.50%, marking the fifth pause in rate cuts since the easing cycle began in September 2024. However, this FOMC meeting set a record for the first time in 30 years with two governors casting dissenting votes—Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller, both appointed by President Trump, advocating for an immediate 25 basis point cut. Federal Reserve Chairman Powell displayed a hawkish stance at the post-meeting press conference, emphasizing optimism about the labor market and ongoing concerns about inflation, leading to a significant cooling of market expectations for a rate cut in September. Powell clearly stated, 'It is too early to assert whether there will be a rate cut in September; we will refer to economic data before the next meeting.'
Division within the Federal Reserve
One of the highlights of this FOMC meeting was the opposition votes from two governors, marking the first such significant divergence since 1995. Bowman and Waller's dovish stance reflects some officials' concerns about the economic slowdown, particularly regarding the potential impact of the Trump administration's high tariff policies on employment and consumption. Both advocated for a 25 basis point rate cut to support the labor market and alleviate economic uncertainty. However, Powell downplayed the internal divisions at the press conference, emphasizing that the FOMC's decisions are based on 'data-driven and risk-balanced' approaches and reiterating that the Federal Reserve's independence is not influenced by political pressure.
Non-farm Data Preview
The non-farm data for July, set to be announced tonight, is highly anticipated. The market expects an increase of 110,000 jobs, down from 147,000 in June, with the unemployment rate expected to rise slightly from 4.1% to 4.2%. This figure is below the average level of the previous months, reflecting a potential slowdown in the labor market, which could alleviate the Federal Reserve's concerns about wage inflation. However, if the data is unexpectedly weak, it may further boost expectations for a rate cut in September, leading to a rapid rebound in BTC; conversely, if it remains strong, the pause in rate cuts could extend to October or December.
Bitcoin Trends
The hawkish tone of the Federal Reserve's July decision has put pressure on Bitcoin prices. Following the announcement, Bitcoin prices fell, reflecting market concerns about a high interest rate environment. (The Wall Street Journal) Reporter Nick Timiraos noted that the FOMC statement added the wording 'magnitude and timing,' suggesting a slowdown in the pace of rate cuts, which reduced the probability of a 25 basis point cut in September from 65% to 60.8%. The dollar index has risen, putting further downward pressure on crypto assets.
Tonight's non-farm data will provide a new catalyst for Bitcoin trends:
New Jobs: Expected at 110,000. If significantly lower than expected, it may increase the probability of rate cuts, boosting Bitcoin prices; if higher than expected, it may reinforce the pause in rate cut expectations, leading to a further rise in the dollar and yields, potentially causing Bitcoin to break below the support level of $116,000 and test the $110,000 mark.
Unemployment Rate: Expected at 4.2%. If it rises to 4.3% or higher, it may trigger market concerns about an economic slowdown, increasing expectations for rate cuts.
Moreover, the short-term effects of Trump's tariff policy have yet to fully materialize. Powell pointed out that tariffs could lead to a 'one-time price shock,' but their long-term impact needs further confirmation from data in August and September. If the tariff effect is mild, the Federal Reserve may lean towards cutting rates; if it drives inflation higher, the pause in rate cuts could extend until 2026.
This article is for informational sharing only and does not constitute any investment advice for anyone.
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