Fed Policy: Two Rate Cuts Locked In, 2026 Remains Ambiguous

A recent Reuters survey shows the Federal Reserve outlook has decisively pivoted. Analysts now widely expect two 25 basis point (bps) rate cuts this year, doubling previous expectations.

They strongly anticipate the initial 25 bps reduction at the October 29 FOMC meeting, which should set the Fed Funds Rate target range at 3.75% to 4.00% by year-end. 115 of 117 economists agree on this first move, though two foresee a more aggressive 50 bps cut in December.

Trader Conviction High, December Still Contingent

The derivatives market shows greater near-term certainty than the economist poll. In fact, rate futures indicate that financial market traders have fully priced in both anticipated rate cuts, showing strong institutional confidence in the dual-cut path for the rest of 2025.

However, this strong market signal contrasts with a slight moderation in conviction among economists regarding the final action. For instance, only 71% of surveyed economists support the second reduction scheduled for December. Consequently, this minor divergence highlights Chairman Powell’s stress on data dependency: the timing of that second move will depend more critically on intervening economic reports than on the highly probable October adjustment.

2026 Rate Path: Uncertainty Remains

While the immediate easing cycle appears settled, the medium-term outlook extending into 2026 lacks clear consensus, according to the poll data. The survey reveals significant disagreement regarding the interest rate trajectory for the subsequent year, confirming that the terminal rate for this easing cycle remains an unresolved structural question for both policymakers and financial analysts.

This polarization within the economic community stems from fundamental debates over long-term forces, including potential productivity shifts and the true level of the natural rate of interest (r*). Because the longer horizon currently lacks a clear economic anchor, the path beyond the year-end target range of 3.75% to 4.00% is highly uncertain. 

Consequently, the Federal Reserve will be compelled to rely on a strict, meeting-by-meeting methodology, creating a market dynamic of near-term clarity built upon persistent long-term ambiguity.

Macro Context

The Federal Reserve’s pivot to an easing cycle offers a key structural lift for risk assets. Expected rate cuts increase financial system liquidity, encouraging capital to flow from low-yield instruments into assets offering greater returns, directly benefiting digital currencies like Bitcoin and Ethereum. Lower rates typically weaken the U.S. dollar, providing additional support for dollar-denominated crypto holdings.

However, the crypto market remains vulnerable to volatility. The recent early October $19 billion liquidation event across Bitcoin and Ethereum starkly demonstrated how swiftly fear and forced selling can happen through ecosystems dependent on high leverage.

In contrast, corporate treasuries now possess over 1 million BTC, representing a significant portion of the available supply, with the number of corporate owners increasing significantly since mid-2025. This consistent buying acts as a firming base, suggesting that while the market can endure severe corrections driven by over-leveraging, the fundamental conviction in the asset’s future worth endures.

Signs of market advancement are also evident in how capital is moving. A leveling off in Bitcoin futures volume is occurring alongside a sharp rise in Ethereum futures volume. This contrast suggests that experienced market participants are actively seeking higher-reward hedging strategies within the broader crypto environment as the more relaxed monetary conditions take effect. 

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