Ladies and gentlemen, the big event tonight is basically set——the Federal Reserve will cut interest rates by 25 basis points.
The market has already cast its vote with real money: the prediction platform Polymarket shows a 96% probability of a rate cut, and the CME FedWatch Tool points to an 87.6% probability. Therefore, the interest rate decision at 3 AM itself holds little suspense.
The real highlight is after the rate cut. This meeting is far more than just a simple interest rate adjustment; it is more like a political pressure test and will set the tone for the policy landscape in 2026. The focus is on two aspects:
Will liquidity be released?
What the market is most concerned about is whether the Federal Reserve will send a clear signal of expansion after stopping balance sheet reduction. For example, will it announce that starting from January next year, it will purchase short-term Treasury bills at a scale of $45 billion per month, injecting new liquidity into the market? This will be key in determining the tightness of the funding situation.
How deep are the internal divisions?
This meeting may be the most controversial in recent years. Among the 12 voting members of the FOMC, 5 have already expressed opposition or skepticism towards further easing. Such a level of division has not been seen since 2019, highlighting an increasing politicization tendency within the Federal Reserve. The policy influence game between current Chairman Powell and shadow Chairman Hassett will directly affect future policy paths.
What does this mean for the market?
If the statement leans hawkish (emphasizing inflation risks, downplaying easing prospects), market volatility will increase.
If a dovish signal is released (mentioning economic risks, implying liquidity support), it will be beneficial for risk assets (including cryptocurrencies).
In short, tonight is not only the conclusion of the 2025 policy but also a key window to observe how the Federal Reserve makes choices under political pressure and to glimpse the direction for 2026. Buckle up and prepare for volatility.