Despite discussions about a strong U.S. economy, three Democratic Senators have urged the Federal Reserve to implement an aggressive monetary policy shift.

Crypto-skeptic U.S. Senator Elizabeth Warren from Massachusetts has called on the Federal Reserve and its chair, Jerome Powell, to reduce interest rates by 75 basis points to mitigate recession risks. Warren’s letter, co-signed by fellow Senators Sheldon Whitehouse and John Hickenlooper, highlighted the potential economic declines that smaller funding cuts could trigger.

If the Fed is too cautious in cutting rates, it would needlessly risk our economy heading towards a recession. A number of economists have warned of this risk since July… The Committee must consider implementing rate cuts more aggressively upfront to mitigate potential risks to the labor market.

The document, dated Sept. 16, was issued less than 48 hours before the next Federal Open Market Committee meeting on Wednesday, Sept. 18.

Markets expect Fed chair Jerome Powell to announce a dovish pivot at the FOMC meeting, but the exact rate cut preferred by the central bank was unclear at press time.

The CME FedWatch tool indicated a 61% probability of a 50 bps cut and a 39% probability of a 25 basis-point reduction. Last week, the same tool showed a 14% likelihood of a 50 bps interest rate cut.

The 50 bps option also had significant influence on crypto prediction venues. Data from Polymarket noted odds of 53% for a 50 basis points announcement, followed by 45% for 25 bps. Previously, users predicted a 78% chance of a 25 bps pivot. Bettors had wagered over $40.5 million via the Polygon-based platform on this month’s FOMC decision.

Fed Cut Impact on Crypto Market

If the Fed matches expectations and announces a fund rate cut, experts believe liquidity would flow into risk assets like cryptocurrencies. Market participants are still debating how an aggressive or modest pivot might indicate the Fed’s outlook, with the former suggesting recession concerns and the latter pointing to a firmer grip on inflation.

Horizen Labs CEO and co-founder, Rob Viglione, mentioned that a Fed rate cut seemed likely to propel a bullish Q4 for digital assets like Bitcoin and Ethereum. Historically, the fourth quarter has recorded higher crypto prices compared to mid-late Q3.

In the short term, we could see a price surge, especially in Ethereum and Bitcoin, though it may also bring heightened market volatility. Over the long run, a prolonged low-rate environment could encourage greater innovation and investment in blockchain technology and crypto-related startups.

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