Bitunix Analyst: Fed's 'Hawkish Rate Cut' Sends Mixed Signals, Internal Division Heats Up, Market Repricing 2026 Policy Path

On December 11, the Federal Open Market Committee (FOMC) cut interest rates by 25 basis points to a range of 3.50%-3.75%—its third consecutive rate cut. Three dissenting votes, however, signaled a widening split over policy direction. The post-meeting statement added language about “assessing the appropriate path of the federal funds rate target range” and dropped its description of the unemployment rate as “low,” reflecting officials’ deepening divide on employment risks and inflation stickiness. The Fed will also begin purchasing $40 billion in Treasury securities over 30 days starting December 12. At his post-meeting press conference, Fed Chair Jerome Powell stressed the current rate is near the upper end of the neutral range, and no officials currently project rate hikes. He noted upside inflation risks persist—largely tied to tariffs—and that inflation could ease back to the lower end of the Fed’s 2% target if tariffs are rolled back. On the labor market, Powell said recent data has been overstated, with downside risks to employment. Markets now price in 55 basis points of cumulative rate cuts next year, while the odds of a January rate cut remain below 25%. Major institutions are increasingly split on future policy: Some argue improved inflation supports a March rate cut, while others expect a January pause, a wait-and-see stance in H1 2024, or even a delay until after June. Several Wall Street firms noted the “hawkish rate cut” underscores challenges in maintaining FOMC unity under Powell. Market reaction shifted after initial volatility: Gold and silver rallied (silver hit a record high); U.S. Treasury yields fell, the dollar weakened, non-U.S. currencies broadly rebounded, and U.S. stocks gained. Former President Trump criticized the cut as insufficient, adding to external noise and policy uncertainty. Bitunix Analyst Note: With rate cut timing uncertain, FOMC divisions deepening, and potential 2026 leadership changes, markets will increasingly rely on economic data and liquidity operations to price policy paths. Short-term volatility is expected to rise; directional signals will hinge on clearer employment and inflation data.