The Federal Reserve has given the market a
"Late Christmas Gift"—on the surface, gently lowering interest rates by 25bp,
but secretly stuffing a $40 billion liquidity bonus into our pockets, just like a "proud ex who complains but is actually generous": while saying, "Don't overthink it, this isn't QE," they've already slipped the money into your hands.
**Hawkish Rate Cut: Internal Arguments Hotter than Thanksgiving Turkey**
Interest rates obediently dropped to 3.50%-3.75%, perfectly meeting expectations, market: well, that was to be expected.
But surprisingly, 3 hawks stood up to oppose it—this is the most since 2019! The dot plot is even harsher, directly stating there will only be one cut (25bp) in 2026, with nearly half of the officials internally thinking: "I really don't want to cut at all!"
Powell, at the press conference, tried hard to maintain his persona: "This is just a precautionary rate cut, aimed at preventing a surge in youth unemployment (the poor graduates aged 20-24 are the worst off)."
To translate: inflation is still walking sideways at 2.8%, tariffs could swing back at any moment, 2% target? Take a number and wait, guys.
**True Surprise: Technical Easing, Those Who Understand Will Understand**
More stimulating than the rate cut is—the Federal Reserve announced the immediate restart of "Reserve Management Bond Purchases", spending $40 billion in the first month to buy short-term bonds, with plans to continue ramping up in the coming months.
In the past two years, QT has shrunk the balance sheet by $2 trillion, and bank reserves are almost slim as lightning, with the repo market getting jittery at times. Now? A year-end funding crunch has directly arranged for "technical easing".
Powell blushed as he emphasized: "This is purely a technical operation! It has nothing to do with monetary policy!"
The market collectively rolled their eyes: fine, fine, if you say it's technical, then it's technical, anyway the money is in, and if the Christmas rally doesn't break into a disco, it would be a disservice to this $40 billion.
In short, this is a "hard on the outside but soft on the inside" hawkish rate cut + an "invisible easing of 300 taels of silver here".
In the short term, U.S. stocks are soaring, risk assets are having a blast; in the long term, the rate cut space is tightly constrained by the dot plot.
Is the Christmas rally coming? It is coming, but don’t get too excited, Uncle Powell might suddenly say: "Young people, drink some cold water and calm down."
