Bitunix Analyst: Fed Delivers a “Hawkish Cut,” Signaling Mixed Messages as Internal Divisions Deepen and Markets Reprice the 2026 Policy Path
TL;DR
The Fed cut rates by 25bps to 3.50%-3.75%, but internal divisions and mixed signals emerged, with markets repricing expectations for future cuts. Powell emphasized no rate hikes for now, while inflation and labor risks persist, leading to volatile but bullish market reactions.
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According to Followin, On December 11, the FOMC cut rates by another 25bps to 3.50%–3.75%, marking a third consecutive cut. However, the three dissenting votes revealed widening divisions within the Committee. The statement added new language about “considering the extent and timing of further adjustments,” while removing the reference to a “low” unemployment rate—indicating growing disagreement over labor-market risks and inflation stickiness. Starting December 12, the Fed will purchase $40 billion in Treasury bills over 30 days.
In the press conference, Powell emphasized the policy rate is near the upper end of its neutral range and that no one is considering rate hikes at this stage. He acknowledged that inflation risks remain but are largely tariff-driven; a reversal in tariffs could push inflation back toward the lower end of the 2% range. He also admitted recent labor data has been overstated and that employment carries downside risk. Markets now expect 55bps of rate cuts next year, while the probability of a January cut remains below 25%.
Wall Street forecasts have also diverged:
• Some institutions expect easing to resume as early as March.
• Others believe the Fed may pause in January and remain on hold through H1.
• A few argue rate cuts may not come until after June.
Many analysts noted that this “hawkish cut” under Powell highlights the FOMC’s growing difficulty in maintaining internal cohesion.
Market reactions were volatile but ultimately bullish: gold and silver spiked, with silver hitting an all-time high; Treasury yields fell; the USD weakened; major non-USD currencies rallied; and U.S. equities moved higher. Trump criticized the cut as insufficient, adding further political noise to the policy outlook.
Bitunix Analyst View:
With uncertainty around the pace of cuts, widening internal divisions, and potential leadership changes in 2026, markets will rely more heavily on data and liquidity operations to price the policy path. Short-term volatility may rise, and clearer directional signals will require confirmation from labor and inflation trends.