The Federal Reserve held a meeting and superficially lowered interest rates (to 3.5%~3.75%), but the attitude is actually very "hawkish". This is a typical hawkish rate cut, with serious divisions in the Federal Reserve's voting, upgraded economic forecasts, and the dot plot indicating "only one rate cut in 2026", strongly suggesting that the rate cut cycle is about to pause.
➤ The key change is in the dot plot
2026 expectations: The September dot plot suggested multiple rate cuts in 2026, but the latest December dot plot shows that the median expectation is only one rate cut in 2026 (by 25BP).
Terminal rate: This means that the "terminal" of this rate cut cycle may be around 3.25% - 3.50%, which is higher than the market previously expected.
➤ Powell's speech subtext
Although Powell's speech at the press conference tried to remain neutral, it revealed a clear intention to pause here:
1. Future interest rate cuts are not a done deal: He clearly stated that the future policy path may be 'paused' or 'tweaked', entirely dependent on data. This is more cautious compared to the previous tone of 'certainty that inflation will decline'.
2. Economy stronger than expected: The Federal Reserve has raised its GDP growth forecast for 2026 (from 1.8% to 2.3%) and has lowered concerns about unemployment. The subtext is that the US economy does not need as many interest rate cuts to stimulate it.
3. Inflation remains sticky: Acknowledging that inflation is slightly above target, and the adjustment in core PCE expectations shows that the 'last mile' of anti-inflation is very difficult.
➤ Impact on subsequent market trends?
Short term (next month): The market will first digest the benefits of 'interest rate cuts landing'. The Dow and S&P 500 may maintain high-level fluctuations or even slight increases because corporate earnings (especially in tech stocks) remain strong, and there is no risk of economic recession (successful soft landing).
Medium term (Q1 2026): Risks are accumulating. Since the market originally expected more interest rate cuts in 2026, but now this expectation has fallen short (only one left), overvalued sectors (such as some AI bubble stocks) may face 'valuation killing' pressure.
Strategy: Style may shift from 'interest rate sensitive' (like small-cap stocks and real estate stocks) to 'performance certainty' (like large-cap blue chips).
➤ Impact of this hawkish interest rate cut on cryptocurrency
Cryptocurrency is most sensitive to the Fed's pause because it is a purely liquidity asset.
Bad news: The pause in interest rate cuts means that liquidity in the fiat world is not as abundant as expected, and the previously hyped 'massive liquidity bull market' logic is hindered.
Good news: The US economy is not in recession, risk appetite remains, and there has been no liquidity crisis.
Regardless of current profits or losses, sell small coins and switch to BTC or USDT/USDC (to earn financial interest).
