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Key takeaways

  • The Fed’s Dec. 9-10 meeting carries unusual weight as markets wait to see whether another rate cut will arrive before Christmas, shaping bonds, equities and crypto.

  • After two cuts in 2025, rates now sit at 3.75%-4.00%. Labor weakness and softer inflation support further easing, but officials remain divided because inflation risks have not fully cleared.

  • A cooling job market, easing inflation and the end of quantitative tightening could justify another reduction and align with year-end liquidity needs.

  • Sticky inflation, gaps in economic data caused by the government shutdown and a divided Fed may push policymakers to keep rates unchanged this December.

When the US Federal Reserve meets on Dec. 9-10 to decide on interest rates, it will not be just another routine gathering. Markets are watching closely to see what direction policymakers choose. Will the Fed cut rates again before the holidays? A pre-Christmas Eve reduction could send waves through bonds, stocks, credit markets and crypto.

This article explains why the Fed’s pre-Christmas meeting is significant and outlines the factors supporting or opposing a potential rate cut. It also highlights what to watch in the coming weeks and how a Fed move could affect crypto and other financial markets.

The background of a December rate cut

Central banks typically cut rates when inflation is easing, economic growth slows or financial conditions become too tight. In late October, the Federal Reserve lowered rates by 25 basis points, setting the federal funds target range at 3.75%-4.00%, its lowest level since 2022. The move followed another 25-basis-point cut in September 2025, making it the Fed’s second rate reduction of the year.

The move came amid clear signs of a cooling labor market. October recorded one of the worst monthly layoff totals in more than two decades, according to multiple labor-market reports, reinforcing concerns about weakening job conditions. The Fed’s October statement echoed this trend, noting that risks to employment had increased even as inflation remained somewhat elevated.

At a press conference, Fed Chair Jerome Powell stressed that a December cut is “not a foregone conclusion.” Yet economists at Goldman Sachs still expect a cut, pointing to clear signs of labor market weakness. Fed officials remain divided, with some emphasizing inflation risks and the limited room for further easing.

A December rate cut is possible, but it is not guaranteed.

Factors supporting a potential rate cut

There are several reasons the Fed may decide to cut rates:

  • Cooling labor market: Private sector data shows softer hiring, rising layoffs and a slight increase in unemployment.

  • Moderating inflation: Inflation is still above target but continues to trend lower, giving the Fed more flexibility to ease policy.

  • Ending quantitative tightening: The Fed has announced it will stop reducing the size of its balance sheet beginning Dec. 1.

  • Pre-holiday timing: A rate cut would align with year-end liquidity needs and help set expectations for 2026.

Arguments for the Fed to postpone action

Several factors suggest the Fed may delay a rate cut in the near future:

  • Sticky inflation: According to the Fed’s latest statement, the inflation rate remains “somewhat elevated.”

  • Data vacuum: The US government shutdown has delayed key employment and inflation reports, making policy assessments more difficult.

  • Committee division: Federal Reserve officials are split on the appropriate path forward, which encourages a more cautious approach.

  • Limited room for easing: After multiple cuts this year, some analysts argue that policy is already close to a neutral level.

Did you know? In March 2020, the Fed cut interest rates to near zero to respond to the COVID-19 crisis. It lowered rates by a total of 1.5 percentage points across its meetings on March 3 and March 15.

What to monitor before December

These factors are likely to shape the Fed’s upcoming policy decision on rate cuts:

  • Nonfarm payrolls and unemployment: Is the job market continuing to slow?

  • Inflation data: Any unexpected rise in inflation will reduce expectations for policy easing.

  • Financial conditions and market signals: Are credit spreads widening, and is overall market liquidity tightening?

  • Fed communications: Differences of opinion within the Federal Open Market Committee (FOMC) may influence the outcome.

  • External shocks: Trade developments, geopolitical risks or sudden supply disruptions could shift the Fed’s approach.

Did you know? US stocks have historically returned about 11% in the 12 months after the Fed begins cutting rates.

How a Federal Reserve cut may impact crypto

Fed rate cuts increase global liquidity and often push investors toward riskier assets like crypto in search of higher returns. Bitcoin (BTC) and Ether (ETH) tend to benefit from stronger risk appetite and rising institutional inflows. Lower decentralized finance (DeFi) borrowing rates also encourage more leverage and trading activity. Stablecoins may see greater use in payments, although their yield advantage narrows when rates fall.

However, if a rate cut is interpreted as a signal of recession, crypto may experience equity-like volatility. Markets might see an initial boost from easier liquidity, followed by a pullback driven by broader macro concerns. If global financial conditions loosen instead, the environment could support further crypto demand.

Lower borrowing costs make it easier for people and institutions to take investment risks, which can draw more interest toward digital assets. As more money flows into the sector, crypto companies can build better tools and services, helping the industry connect more smoothly with the rest of the financial system.

Did you know? When the Fed cuts rates, short-term bond yields usually fall first, creating opportunities for traders who track movements in the yield curve.

Consequences of a Fed rate cut on other financial sectors

Here is a look at the potential effects on major asset classes if the Fed cuts interest rates:

  • Bonds and yields: Short-term yields will likely decline as markets adjust their expectations. The yield curve may steepen if long-term yields remain stabler than short-term ones, which can signal confidence in future growth. If the cut is viewed as a sign of recession risk, long-term yields may fall as well, resulting in a flattening or even an inversion of the curve.

  • US dollar and global FX: A rate cut generally weakens the dollar because interest rate differentials narrow. This often supports emerging markets and commodity-exporting countries. If the cut is driven by concerns about economic growth, safe-haven demand may temporarily push the dollar higher.

  • Equities: A pre-Christmas Eve rate cut could spark a rally in US stocks if investors see it as a sign of confidence in a soft landing. A soft landing refers to cooling inflation alongside a stable labor market. If the cut is motivated by growth worries instead, corporate earnings may come under pressure, and defensive sectors could outperform cyclical ones.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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Politics

UK central bank still ‘disproportionately cautious’ about stablecoins

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November 14, 2025

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UK central bank still ‘disproportionately cautious’ about stablecoins

The UK’s central bank, the Bank of England (BOE), has released a proposed regulatory regime for stablecoins. The consultation paper took into account the perspectives of the crypto industry, but some observers say it remains restrictive.

BOE released the document on Nov. 10 — some two years after it announced the initial discussion paper. The original offered a vision for crypto that many in the industry claimed would doom the UK’s digital asset space.

The BOE said that it received comments and feedback from a broad range of 46 different stakeholders, including “banks, non-bank payment service providers, payment system operators, trade associations, academia, and individuals.”

The UK’s central bank may have scrapped some more hardline requirements, but some in the industry believe that it isn’t enough. Tom Rhodes, chief legal officer at UK-based stablecoin issuer Agant, said the bank remains “disproportionately cautious and restrictive.”

The bank also released a roadmap for further rulemaking. Source: Bank of England

Bank of England still cautious on stablecoins

The new iteration presents a number of improvements on the 2023 version, Rhodes told Cointelegraph.

“The latest proposals do include some innovative features, such as direct BOE liquidity lines and the ability to repo reserves for liquidity purposes.”

He said that, as it concerns the UK market, “these proposals can be further explored and potentially expanded to create a more competitive backing asset regime, without compromising on stability.”

But despite the “welcome progress in the BOE’s sentiment towards stablecoins,” it has been “unusually vocal about the perceived risks of stablecoins,” said Rhodes.

One of the more controversial restrictions in the paper was limits on what the BOE called a “systemic retail stablecoin.” In the paper, this is defined as a stablecoin that is “widely used by individuals to make everyday payments such as for shopping and receiving salaries.”

The central bank wants to see limits of 20,000 pounds for individuals and 10 million pounds for businesses that accept it as a form of payment. This is an increase from the initial proposal, but the idea of limits on how much crypto you can hold didn’t sit well with some. 

Crypto influencer Aleksandra Huk wrote, “Bank of England wants to cap stablecoin holdings at £20,000. Who gave them the right to tell us what to buy, where to store our money and how much we can have? […] Honestly, this is the best advert ever for privacy coins and for leaving the UK.”

Related: UK crypto hopes stall, but ‘encouraging signs’ are there

There are a few caveats to the suggested rule. Geoff Richards, head of community at the Ontology Network, noted, “The proposal applies only to sterling-denominated stablecoins used in UK payment systems that could become ‘systemic.’ Not USDT, not USDC, not random DeFi tokens.”

Ian Taylor, board member of crypto industry advocacy group CryptoUK, told Cointelegraph that he understands the central bank’s more cautious approach, at least as it applies to the stablecoin limits:

“The Bank of England has a mandate to protect against financial stability. And that financial stability is connected to the banking system. So insofar as banks take deposits and they issue loans against those deposits […] creates credit, this is an economic benefit to any economy that we have.”

The BOE is rightfully worried that taking deposits out of banks would reduce their ability to lend, affecting financial stability. “So, that’s why they want to baby-step this.”

Rhodes said that the “vast majority” of UK stablecoins will not fall under the regime anyway, at least not as stated in the paper. He noted that Mastercard was only recognized as a systemically important payment system in 2021 and that non-systemic stablecoins will be regulated under the Financial Conduct Authority’s (FCA) ruleset, “which is less restrictive.”

Still work to be done as UK opens up to crypto

Access to central bank liquidity and deposit accounts at the BOE was a welcome update for stablecoin issuers. But crypto industry representatives believe that there is still room for improvement in the central bank’s plan.

Regarding the stablecoin caps, “The systemic thresholds remain uncertain,” said Rhodes. He said it would be helpful to have clarification from His Majesty’s Treasury when an issuer has reached sufficient scale to “pose a risk to the UK economy as a whole, before they will recognize the issuer as systemic.”

Taylor also noted the difficulty of enforcing these stablecoin caps. If the government is licensing an issuer, then they’re the ones “responsible for monitoring each individual client or customer, whether wholesale, corporate or retail, as to how many stablecoins they’ve given them.”

The problem is that many people get their stablecoins on secondary markets or a “host of different sources.” People can receive stablecoins as compensation at work or on an exchange or peer-to-peer transaction. “So, the actual operational enforcement of that I question, and we’ve seen no detail in regards to that.”

Overall, “clarity and speed” will make the UK stablecoin ecosystem more competitive, said Arvin Abraham, partner at Goodwin Procter. He told Cointelegraph that regulators need to give issuers “a clean runway and predictable timelines” to navigate the approvals process.

Speed isn’t the government’s strong suit, however.

The British government has been working on crypto regulations since 2017, when it first adopted Anti-Money Laundering and Know Your Customer requirements for crypto-related businesses like exchanges. Now, eight years later, the central bank is still developing its policies based on industry feedback.

The slow pace of progress presents a problem. According to Taylor, “We’ve been consulting on a wider framework to regulate stablecoins for almost five years, and we still haven’t gotten any actual license framework in place, which is problematic for a number of reasons,” he said.

“It doesn’t help businesses that want to launch stablecoins in the UK. They don’t have a clear roadmap of how to do that,” he said, “which in turn forces them to move offshore to jurisdictions where there are other regulatory frameworks already live.”

This is for a number of reasons, Taylor explained, including consecutive changes in government, as well as a lack of “real champions in any of our key stakeholders, be that the current government, be that Treasury, be that the FCA.”

Progress on crypto regulations may be slow in the UK — slower than many in the industry would like — but for Abraham, “The Bank is being pragmatic and fair. The overriding message is that innovation is welcome, but if you want your token to function like money, you need money-grade controls.”

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