The rate cut in December has finally landed, but the market atmosphere feels a bit nuanced.

A major central bank indeed cut rates by 25 basis points this time, bringing the interest rate range to 3.50%-3.75%, which seems quite routine. But if you carefully read the new wording in the policy statement—"future adjustments will consider the magnitude and timing"—that’s basically saying, "Will we cut again? Let’s see."

Even more interesting, the internal voting resulted in three votes against. Such a public rift is quite rare. The dot plot is more straightforward: there may be only one rate cut next year, or possibly none at all. Cutting rates while also signaling "don’t expect us to keep cutting" makes this move somewhat contradictory.

But that’s not all. They also announced that starting in 2026, they will buy 40 billion in short-term government bonds each month, under the guise of "moderate balance sheet expansion." Rate cuts plus balance sheet expansion—this combo feels like "say no but do yes," a bit contradictory.

# Breaking down three key signals

**Signal 1: After this cut, the next one isn’t guaranteed**

Powell was quite direct in the press conference—policy is entering an observation period. After three consecutive rate cuts, rates have returned to so-called "neutral levels," and it’s now about data. The problem is, current data may be distorted due to the government shutdown, and some internal dissent exists, so the likelihood of further cuts in the short term is low.

For risk assets like Bitcoin and Ethereum, this isn’t good news. Without the expectation of rate cuts, the market needs to find new narratives.

**Signal 2: Optimistic economic outlook gives them a reason to delay**

Their latest forecast raised growth expectations and lowered inflation expectations. In other words, they believe a "soft landing" of high growth and low inflation is happening. Powell even mentioned that AI investments and productivity gains could sustain economic growth without triggering inflation.

What does this optimism imply? They’re not in a rush to cut rates to support the market anymore. For the crypto market, liquidity expectations might be discounted.

**Signal 3: Balance sheet expansion is "stealth easing"**

Although they talk about waiting and watching, restarting bond purchases is essentially injecting liquidity into the market. Buying 40 billion in short-term government bonds monthly adds up to a significant amount. This "hawkish rate posture with covert balance sheet expansion" is basically leaving a safety net—avoiding overly loose signals while preventing liquidity from drying up.

For crypto markets, this could be a double-edged sword. Balance sheet expansion means long-term liquidity won’t run dry, but if rate cut expectations fade in the short term, volatility could increase.

# Final thoughts

This rate cut appears quite moderate on the surface, but the contradictions behind it are obvious—deep internal divisions, a hawkish shift, and limited room for easing next year. Don’t expect them to keep loosening forever.

For macro-focused friends, keep an eye on two points: first, whether inflation data rebounds; second, whether the pace of balance sheet expansion accelerates. If inflation can’t be controlled, rate cuts might be completely off the table; if the expansion exceeds expectations, liquidity can be sustained for a while.

In short, don’t get too excited or too panicked. The market needs a new narrative, not just old stories.