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.
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Experts See Warning Signs Behind Fed’s Latest Cut
The Federal Reserve cut interest rates again yesterday, 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.
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.
Economist Claudia Sahm also 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. Notably, seven of the nineteen officials anticipate no further rate cuts in 2026.
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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.
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.
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Recession Indicators Flash Red as Layoffs Surge and Small Businesses Collapse
Meanwhile, more recession indicators are emerging. Job-market stress, in particular, is rising sharply. As of December 1, 2025, US employers had announced roughly 1.2 million layoffs.
An analyst stressed that when yearly job losses top 1 million, recessions often follow or are already underway.
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The Kobeissi Letter reported this week that 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. Over the past five years, bankruptcies have increased by 83%
The surge comes despite the debt cap being lowered from $7.5 million to $3 million. Even with the tighter threshold, filings have accelerated.
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.
Source: https://beincrypto.com/fed-rate-cuts-recession-layoffs-2025/
