The Fed should learn lessons from Bitcoin's monetary policy.

Author: Anthony Pompliano, Founder and CEO of Professional Capital Management; Translated by; Shaw Jinse Finance

The Federal Reserve unexpectedly cut interest rates by 25 basis points yesterday. Chairman Powell subsequently held a press conference to share information that people have already known online for months.

Powell told us: "In the short term, inflation faces upward risks, while employment faces downward risks."

Powell's demeanor throughout the press conference seemed to convey a sense of frustration. He did not appear excited to be attending the conference and showed no enthusiasm for the challenges he faced.

One important reason the Federal Reserve is now in its current predicament is that it has shifted from a "data-dependent" approach over the past few years to a more recent focus on economic forecasting. The Federal Reserve is no longer simply examining data and managing monetary policy based on current metrics, but has decided to engage in the forecasting game, expecting tariffs to lead to high inflation levels.

As we know now, and as I predicted from the very beginning, tariffs are not a factor that causes inflation. The high inflation that the Federal Reserve expected has never materialized. This means that their predictions were wrong, and their long-term stance on maintaining high interest rates in monetary policy is also incorrect.

But the situation within the Federal Reserve is much more complex than it appears on the surface. The members of the Federal Reserve have significant differences regarding what the current level of interest rates should be. Navy Federal Chief Economist Heather Long explained:

"This is crazy. Look at the predictions of the 19 Federal Reserve officials for interest rates for the remainder of 2025. Just one chart shows the tension within the Federal Reserve."

One director wants to raise interest rates, six directors believe that the Federal Reserve should keep rates unchanged, two directors support another rate cut, nine directors support two more rate cuts, and one director (possibly Stephen Moore, the latest appointee by Trump) wants to see cuts equivalent to five by the end of the year. We are likely to have two more rate cuts. One in October, one in December. But you can see the struggles ahead...

Think about how crazy these things are. Yesterday, someone advocated for raising interest rates, while others suggested cutting rates five times before the end of the year. People not only disagree on the number of rate cuts, but they can't even reach a consensus on whether to raise or lower rates.

This highlights the problem of a human-centric monetary policy. Since people are not good at making complex decisions, individuals cannot successfully manage capital costs. Coupled with the fact that we delegate this task to a committee, you can understand why this becomes even more difficult.

Committee management will definitely lead to erroneous decisions.

But if this isn't bad enough, take a look at this interest rate chart since 2020. We have gone through various changes. How should people plan their lives?

If the cost of capital drops from 2% to 0% over five to six years, then skyrockets to over 5%, and finally falls back to 4%, it really is very difficult to survive in this world. It's simply crazy volatility, and this kind of fluctuation is truly unnecessary.

The monetary policy of Bitcoin was established in 2009, and for over 15 years, it has never deviated from its set monetary policy. In my opinion, the Federal Reserve could learn some lessons from Bitcoin.

Finally, remember the 25 basis point rate cut in 1998, which fueled the crazy rise of tech stocks during the Internet bubble.

The current situation is strikingly similar. The Federal Reserve cut interest rates during the wave of innovation related to artificial intelligence. If the Federal Reserve cuts rates multiple times this year as it said yesterday, then we should expect a significant rise in the stock market.

The Federal Reserve is slow to act. Yesterday they hesitated and only cut rates by 25 basis points. But for investors, this is ultimately irrelevant. Everything is on the rise, so just hold onto your assets and enjoy the increase.