A couple of days ago, I talked about lowering interest rates by 25 basis points, which is basically not surprising. The more critical issue is the dot plot, where the median is likely to indicate only two rate cuts. The market's previous hopes for three or four cuts are basically out of the question.

Powell's speech is expected to be similar to the one at the end of October, leaning towards a hawkish tone, with the key point being "how hawkish he will be." For example: no guarantee of another cut next time, completely data-dependent, inflation may have eased but risks still remain—if he delivers these points more firmly, market sentiment could turn cooler in the short term.

The area that could potentially exceed expectations is whether he will also announce bond purchases (mainly short-term bonds) or provide clearer signals on RRP/repo operations. Reserves have already dropped to levels seen at the end of 2022, and overall liquidity has remained tight, with SOFR repeatedly hitting the upper limit of the corridor. This is a situation the Fed does not want to see, as excessive tightness can lead to accidents.

For Powell, what he seeks now is "balance." Lowering rates gives the market a gesture, but he will never allow the market to bet more optimistically about the future—after all, there are significant internal disagreements within the Fed at this time.

For the market, of course, there is a desire for a clear path. The shadow chairman has already drawn the broad direction for everyone, but at this point in time, the power of discourse still lies with the current chair. If Powell is unwilling to clarify today, then tonight's volatility is sure to be significant.