Fed Delivers Third Rate Cut—Is a Recession Now Inevitable?

Source: CryptoNewsNet Original Title: Fed Delivers Third Rate Cut—Is a Recession Now Inevitable? Original Link:

The Federal Reserve’s Third Rate Cut and Recession Concerns

The Federal Reserve’s third rate cut in 2025 has lowered the federal funds rate to 3.5%-3.75%. However, it has increased one thing: concerns about a potential recession. Analysts warn that the current trends expose weaknesses in the US economy, with many expecting market turbulence ahead.

Experts See Warning Signs Behind Fed’s Latest Cut

The Federal Reserve cut interest rates again, marking the third reduction following similar moves in September and October. The latest decision brings the federal funds rate to its lowest level since November 2022.

In its statement, the Fed noted that overall economic activity continues to grow at a moderate pace. However, policymakers acknowledged clear signs of cooling in the labor market, including slower hiring and a slight uptick in unemployment.

“Inflation has moved up since earlier in the year and remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.”

Rate cuts are typically welcomed by stock and crypto markets, which tend to rally on cheaper borrowing costs. But not everyone is celebrating. Some market observers interpret the move as a warning signal.

If you believe in the Bitcoin halving cycle, why don’t you believe in the rate cuts lead to recession cycle? More data points to validate it!

Economist Claudia Sahm cautioned that investors should only hope for additional rate cuts if they are willing to accept the possibility of a recession. The FOMC’s dot plot signaled just one additional cut in 2026, with seven of the nineteen officials anticipating no further rate cuts in 2026.

“If the Powell Fed ends up doing a lot more cuts…then we probably don’t have a good economy. Be careful what you wish for.”

Alongside the rate cut, the central bank announced it will purchase $40 billion in Treasury bills over the next 30 days. Henrik Zeberg, Head Macro Economist at Swissblock, says this exposes underlying economic fragility.

“The Economy is NOT well. It is rolling over – and that puts pressure on Liquidity, which is the signal the FED gets. But the FED doesn’t get that the Consumer is crushed – and that it will cause the Recession.”

Zeberg revealed that his economic model has been signaling a slowdown since November 2024, reinforcing his view that the US is now moving toward a recession.

Recession Indicators Flash Red as Layoffs Surge and Small Businesses Collapse

More recession indicators are emerging, with job-market stress rising sharply. As of December 1, 2025, US employers had announced roughly 1.2 million layoffs—the highest level since the pandemic and the most since the start of the Great Recession.

An analyst stressed that when yearly job losses top 1 million, recessions often follow or are already underway.

Not good news for job seekers: The hiring rate fell back to 3.2% in October. This is one of the lowest hiring rates since the Great Recession era. Yes, job openings ticked up in October, but it doesn’t matter if it’s not leading to actual hiring.

US small businesses are also facing mounting financial strain. A record 2,221 firms have filed for bankruptcy under Subchapter V so far this year, with bankruptcies increasing by 83% over the past five years.

The surge comes despite the debt cap being lowered from $7.5 million to $3 million. Even with the tighter threshold, filings have accelerated.

“The increase has been driven by persistently high borrowing costs, cautious consumer spending, and overall economic uncertainty, which have weighed on small business earnings. US small business bankruptcies are surging as if there is a recession.”

With many recession signals flashing, the US economy faces significant tests. While rate cuts can offer short-term relief, deeper economic weakness may test risk assets. For crypto investors, the key question is whether Bitcoin and other digital assets behave as safe havens or fall in line with broader risk-off trends as the outlook deteriorates.