Bitcoin Turns Choppy as Powell Signals Caution on Labor and Inflation Trade-Off

Bitcoin jumped above $94,000 on Wednesday before quickly paring gains as Federal Reserve Chair Jerome Powell struck a cautious balance between easing concerns over the labor market and lingering inflation risks after a widely anticipated 25 basis-point rate cut.

After hovering near $92,000 for much of the session, bitcoin spiked to roughly $94,400 during Powell’s press conference, when he warned the labor market could be weaker than previously thought. The move reversed soon after, however, as Powell reiterated that inflation remains too high and that the central bank’s work is not yet complete.

Bitcoin was last trading around $92,000, down about 0.8% over the past 24 hours. Ether continued to outperform, holding above $3,300 and rising roughly 1.1% over the same period.

U.S. equities were modestly higher late in the day, with the Nasdaq up 0.5% and the S&P 500 gaining 0.7%. The dollar posted the most notable move, sliding about 0.6% against the yen, euro and British pound.

Powell said policy is now “within a range of plausible estimates of neutral,” giving the Fed room to assess the timing and scale of any further adjustments. He emphasized that officials are “well positioned to wait and see” on additional rate cuts, noting that a significant amount of economic data will arrive ahead of the Fed’s January meeting.

In addition to the rate cut, the New York Fed said it will begin purchasing short-term Treasury bills and Treasuries with maturities of up to three years if needed, targeting roughly $40 billion in purchases over the next month starting Friday. The move is intended to ease financial conditions without signaling the start of a new quantitative easing cycle. Powell said the purchases will remain “elevated” for several months.

The decision marks a departure from the past three years, during which the Fed steadily reduced its balance sheet following the pandemic-era expansion.

Analyst views

“The Fed was careful to stress that this cut does not signal an aggressive easing cycle,” said Daniela Hathorn, senior market analyst at Capital.com, noting that future policy decisions will depend heavily on incoming inflation and labor-market data. While officials agreed on modest easing amid uneven post-shutdown data, she said the updated guidance emphasized caution.

Brian Coulton, chief economist at Fitch Ratings, said the decision was finely balanced, with two FOMC members voting to keep rates unchanged. A mild recent pickup in core inflation likely convinced the committee that another cut — while keeping rates slightly above neutral — was appropriate. Coulton said he expects just two more cuts by June 2026, taking the upper bound of the fed funds rate to 3.25%.

David Hernandez, crypto investment specialist at 21Shares, said Powell is “threading the needle” between the Fed’s dual mandate by signaling a pause in rate cuts while restarting Treasury purchases. For bitcoin to break higher, Hernandez said it needs fresh momentum to overcome heavy short positioning near the $94,500 resistance zone.

“If spot ETF inflows strengthen as borrowing costs fall, that could be the catalyst that turns caution into momentum and pushes bitcoin back above the $100,000 psychological level,” he said.

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