The Fed’s Cautious Stance Puts Crypto Growth on Hold

This year, the cryptocurrency market’s longing for increased liquidity through quantitative easing was left unmet as the Federal Reserve maintained its conservative approach. Although monetary tightening tactics were paused by December, the absence of liquidity expansion highlighted the Fed’s cautious stance, starkly different from other global central banks. This hesitation by the Federal Reserve emerged as a significant barrier to what might have been a stellar year for the cryptocurrency sector. At the same time, amidst these developments, there is a palpable sense of triumph at the White House regarding President Trump’s policy decisions.

How Did the White House Respond?

Throughout the year, President Trump insisted that tariffs would not inflate prices, frequently urging for reduced interest rates. His criticism extended to Federal Reserve officials, including unsuccessful attempts to dismiss key figures like Cook. Ultimately, the White House, via Press Secretary Leavitt, conceded Trump’s foresight, especially in light of economic trends showing falling inflation alongside rising wages.

“As President Trump told Americans last night: inflation continues to decline, wages are on the rise, and America is heading for an unprecedented economic boom. Today’s report shows inflation far below market expectations, contrasting starkly with the previous record-level inflation crisis at 9% under Joe Biden. Prices in key segments like food, medicine, gas, airfare, car rentals, and hotels continue to drop, setting a new low for core inflation. Americans can expect this trend of falling prices and rising wages to persist into the New Year!”

Can Crypto Markets Benefit from Lower Interest Rates?

Today’s encouraging inflation data suggest a favorable direction. However, until inflation decreases below the 2% target, Powell and the Fed’s Hawks remain unconvinced that substantial cuts in interest rates are appropriate, considering inflation remains above desired levels.

As the pivotal year of 2026, with its electoral implications, approaches, it’s crucial for Trump to roll out economic strategies that ensure political success. This scenario necessitates a shift by the Federal Reserve towards rapid quantitative easing, which could invigorate the growth of risk assets such as cryptocurrencies. Inflation has already plummeted by 70% from its peak during Biden’s tenure, with projections suggesting it might drop to 1.2% if current trends persist.

Price drops in essential areas such as gas, coupled with other sectoral cost reductions, have played a crucial role in alleviating inflation. The White House emphasizes how Trump’s predictions of decreased housing inflation due to measures against illegal immigration have been proven right, sharing various expert perspectives on the success.

• Steve Liesman from CNBC expressed admiration, labeling the figures as “very impressive.”
• Matt Egan from CNN termed it “another step in the right direction.”
• Ken Rogoff from Harvard considered the data to surpass everyone’s expectations.
• Steve Moore praised the news with optimism for both Wall Street and Main Street.
• Mark Tepper from Strategic Wealth Partners spoke of an unforeseen drop in inflation.
• Tiana Lowe Doescher from The Washington Examiner commended the achievement.
• Chris Anstey from Bloomberg noted how expectations were surpassed.
• Andrew Ackerman from The Washington Post referred to the easing of inflation pressures in November as a relief.

Despite these positive developments, expectations for interest rate reductions in 2026 have stayed firm at 2%-3%. This is contingent on December’s inflation report reaffirming the favorable numbers seen today before any further decisions are considered.