The so-called Federal Reserve spokesperson Nick Timiraos made it very clear: At this monetary policy meeting, Powell may be facing the most divided colleagues of his tenure.
The situation is as follows: This week, the Federal Reserve is holding its last meeting of the year. However, up to half of the members have expressed in various occasions that they do not see a strong reason to cut interest rates. Such a level of public division has been rarely seen in recent years.
Although Powell has the final decision-making power, this time he needs to push for a rate cut, which is no longer as straightforward as before, but requires building consensus and reducing dissenting votes. In other words, he has to work hard to persuade a group of colleagues who are not very willing.
The news report mentioned the key issue: the slowdown in employment growth. Is it due to weak labor demand or a contraction in labor supply caused by reduced immigration?
The data is contradictory: the unemployment rate has reached 4.4%, but employment growth is better than expected. This has led to sharply different judgments within the Federal Reserve. Some believe it is time to take action to stabilize the economy, while more think the reasons are insufficient and want to wait and see.
My view is straightforward: this greatly increases the uncertainty of this meeting and the risk of positive expectations failing or even turning negative. Even if there is a rate cut, it may be a discounted positive. The report states that one possible compromise is: a 25 basis point cut, but signaling a higher threshold for subsequent easing in the post-meeting statement. Translated, it means: a cut is possible this time, but it won't be so easy to cut again next time. If the market interprets this as a hawkish rate cut, it will significantly undermine the boost to risk assets.
The policy path has become ambiguous. Previously, the market believed the Federal Reserve would enter a stable rate cut cycle, but this expectation has now wavered. If half of the members feel a cut is not warranted, how many times can we smoothly cut next year? Uncertainty is what the market hates most; it directly suppresses retail investors' risk appetite. This is not good news for the crypto world, which relies on global liquidity and risk sentiment.
Short-term volatility risk is increasing. Decision-making under such high divergence will lead to huge disparities and long/short battles in the market after results are announced. Prices may fluctuate violently. You need to be mentally prepared; even if the rate cut news is announced, the market may move to a situation where the positives are exhausted and become negatives, because the impact of hawkish statements may overshadow the rate cut itself.
Don't rush in blindly at the mention of a rate cut. This situation is completely different from the past times when there was unanimous support for easing. The real key is not whether to cut, but how Powell will explain this decision afterward. How will he describe the future path? Is his tone dovish or hawkish? This is ten times more important than a 25 basis point cut itself.
For the crypto world, this is likely a trigger for increased volatility rather than a one-sided rise. Before the meeting results and Powell's speech become clear, the market will be very conflicted. Your leveraged contracts and altcoin positions will be very fragile in this environment.
Powell indeed has no way out this time. His decision will not only affect interest rates but also impact the market's confidence for the entire next year. For us, controlling positions, reducing leverage, and maintaining patience is more important than betting on direction before everything becomes clear. Don’t forget, in the capital market, longevity is the winner. Waiting until the market digests all the information and moves out in a clear direction to act is not too late at all.
So, while the market is still celebrating the words 'rate cut', the truly smart money is already thinking: if Powell's choice this time rewrites the script for 2024—where should we position ourselves in advance, and where should we decisively retreat?
Come to the chat room I will reveal: find the certain opportunity belonging to the crypto world in the cracks of the Federal Reserve.
