Powell signals interest rate cuts, a slight decrease may occur in the second half of 2026

Federal Reserve Chair Powell recently stated that there is a possible inclination to cut interest rates modestly later this year. This statement sends an important signal: the Fed’s stance on monetary policy is undergoing subtle changes. Although the wording of “possible” and “modest” indicates that policymakers are still observing economic data, it is enough for the market to reassess the liquidity environment in the second half of the year.

Market Implications of Rate Cut Expectations

Interpretation of Policy Signals

Powell’s remarks adopt relatively cautious language, reflecting the Fed’s sense of moderation in policy adjustments. Specifically:

• “Possible inclination to” indicates that a rate cut is not certain but conditional on subsequent economic data
• “Modest” means that even if a cut occurs, the magnitude will be restrained, likely around 25 basis points rather than a larger cut
• “Later this year” points to the second half of 2026, providing the market ample observation time

This mode of signaling is typical of the Fed—leaving room for policy adjustments while avoiding overcommitment.

Impact Pathways of Rate Cuts on the Crypto Market

Expectations of rate cuts generally influence the cryptocurrency market through the following channels:

Lessons from Historical Experience

The Fed’s rate cut cycles often boost the performance of risk assets like cryptocurrencies. After the Fed began a rate cut cycle in 2023, Bitcoin rose from about $16,500 at the start of the year to around $42,000 by year-end. Although this increase was influenced by multiple factors, the accommodative liquidity environment indeed supported risk assets.

Key Points to Watch Moving Forward

• Whether Powell continues to signal similar cues in subsequent Fed meetings
• Whether inflation data supports rate cut expectations
• Performance of other economic indicators (employment, GDP, etc.)
• Market expectations regarding the timing and magnitude of rate cuts

Summary

Powell’s signals of a potential rate cut set a relatively positive tone for the market in the second half of the year. However, it is important to note that this signal is not highly certain—“possible” and “modest” leave room for policy adjustments. For crypto investors, this is more of a positive background signal rather than a confirmed bullish indicator. The actual market reaction will depend on upcoming economic data and further Fed statements. The key is to continuously monitor the Fed’s policy stance rather than overinterpret individual signals.