**Interpretation of the Federal Reserve's December 2025 Meeting (Hawkish Rate Cut, Optimism Exhausted)** The Federal Reserve held its meeting, ostensibly cutting interest rates (to 3.5%~3.75%), but adopted a decidedly "hawkish" tone. This was a classic hawkish rate cut, with the Fed showcasing serious voting divisions, raising economic projections, and revealing its dot plot signaling "only one rate cut in 2026." These developments strongly suggest that the rate-cutting cycle is nearing a pause. --- ### **Key Changes in the Dot Plot** **2026 Projections:** The September dot plot implied multiple rate cuts in 2026. However, the updated December dot plot shows a median expectation of just **one** rate cut in 2026, with a magnitude of 25 basis points (BP). **Terminal Rate:** This indicates that the terminal rate for the current rate-cutting cycle could stabilize around **3.25%–3.50%**, higher than market expectations. --- ### **Subtext of Powell’s Remarks** While Powell’s press conference aimed to strike a neutral tone, his comments revealed an apparent intention to pause: 1. **Future Rate Cuts Not Guaranteed:** Powell emphasized that the future policy path might involve "pauses" or "tweaks," entirely dependent on incoming data. This cautious stance contrasts with earlier rhetoric of being confident about inflation declining. 2. **Economy Performing Better Than Expected:** The Fed raised its 2026 GDP growth forecast (from 1.8% to 2.3%) and lowered unemployment concerns. The underlying message: the U.S. economy may not require as many rate cuts to sustain growth. 3. **Sticky Inflation:** Powell acknowledged that inflation remains slightly above target, with core PCE projections indicating the "final mile" of inflation control will be highly challenging. --- ### **Impact on Market Trends** **Short-term (Next 1 Month):** Markets are likely to first digest the positive news of "rate cuts landing." The Dow Jones and S&P 500 may maintain high-level fluctuations or see modest gains as corporate earnings, particularly for tech stocks, remain robust. Additionally, there’s no risk of economic recession (soft landing achieved). **Mid-term (Q1 2026):** Risks will start accumulating. Since markets had originally anticipated more rate cuts in 2026, disappointment from the revised expectation (only one cut) could trigger valuation pressure in overheated sectors, such as certain AI-driven bubble stocks. **Strategy:** Market preferences may shift from "rate-sensitive sectors" (e.g., small-cap stocks, real estate stocks) to "earnings certainty sectors" (e.g., large-cap blue chips). --- ### **Impact of Hawkish Rate Cuts on Cryptocurrencies** Cryptocurrencies are highly sensitive to Federal Reserve pauses, given their nature as pure liquidity assets. **Bad News:** The rate-cut pause implies that liquidity in the fiat world will not flood in as previously anticipated. The narrative of a "massive liquidity bull market" loses traction. **Good News:** The U.S. economy is not in recession, risk appetite remains intact, and there is no liquidity crisis. **Suggested Action:** Regardless of current profit or loss, sell smaller altcoins and shift holdings to **BTC** or **USDT/USDC** (to earn yield on stablecoins).