Federal Reserve December 2025 Meeting Analysis( Hawkish Rate Cuts, Bullish Sentiment Exhausted)

The Federal Reserve held a meeting, and on the surface, it cut interest rates (to 3.5%~3.75%), but the stance was actually quite “hawkish.” This was a typical hawkish rate cut, with a closely divided vote, upward revisions to economic forecasts, and the dot plot showing “only one rate cut in 2026,” strongly implying that the rate cut cycle is about to pause.

➤ The key change lies in the dot plot
2026 expectations: The September dot plot suggested multiple rate cuts in 2026, but the latest December dot plot shows a median expectation of only one rate cut in 2026 (by 25 basis points).

Terminal rate: This indicates that the “endpoint” of this rate cut cycle might be around 3.25% - 3.50%, higher than market expectations earlier.

➤ Powell’s speech subtle implications
Powell’s remarks at the press conference tried to remain neutral but revealed a clear intention to pause:

1. Future rate cuts are not guaranteed: He explicitly stated that the future policy path could be “pause,” “adjustment,” entirely dependent on data. Compared to the previous tone of “confident inflation will decline,” this is more cautious.
2. The economy is stronger than expected: The Fed raised its 2026 GDP growth forecast (from 1.8% to 2.3%) and lowered worries about unemployment. The underlying message is: the US economy does not need many rate cuts to stimulate.
3. Inflation remains sticky: Acknowledging that inflation is slightly above target, and the adjustment in core PCE expectations shows that fighting inflation’s “last mile” remains very challenging.

➤ Impact on subsequent market trends?
Short-term (next month): The market will initially digest the positive news of the rate cut landing. The Dow Jones and S&P 500 may stay high or even rally slightly because corporate earnings (especially tech stocks) remain strong, and there’s no recession risk (soft landing successful).

Medium-term (Q1 2026): Risks are accumulating. Since the market originally expected more rate cuts in 2026, but now only one is expected, overvalued sectors (such as some AI bubble stocks) may face valuation pressure.

Strategy: The style may shift from “interest rate sensitive” (such as small caps, real estate stocks) to “performance certainty” (such as large-cap blue chips).

➤ Impact of this hawkish rate cut on cryptocurrencies
Cryptocurrencies are most sensitive to the Fed’s pause because they are purely liquidity assets.

Bad news: A pause in rate cuts means that liquidity in the fiat world is not as abundant as expected, and the previously hyped “big liquidity flood bull market” logic is impeded.

Good news: The US economy is not in recession, risk appetite remains, and there has been no liquidity crisis.

Regardless of current gains or losses, sell small tokens and convert back to BTC or USDT/USDC (to earn interest).