The night before the interest rate decision, hawkish rate cuts weigh heavily, liquidity gates face a year-end test for the crypto market; Powell faces a do-or-die battle, with half of his colleagues opposing rate cuts.

At midnight Beijing time on December 11, the Federal Reserve will announce its final interest rate decision of the year. The market has almost reached a consensus that the federal funds target range will likely be cut by another 25 basis points, from 3.75%–4.00% down to 3.50%–3.75%, marking the third rate cut since September. "The Fed's mouthpiece" Nick Timiraos stated: “Federal Reserve officials are about to hold their final interest rate meeting of the year, and up to half of the members in the meeting room may oppose a rate cut. But the final decision still rests with Chair Powell, and despite rare opposition, he seems prepared to push for a rate cut.”
The core focus of this rate cut is actually the press conference following the rate decision. It’s important to note that Powell previously stated he was not in a hurry to cut rates; being “pushed” into a cut this time suggests some passivity. Therefore, during the press conference, he is highly likely to adopt a hawkish stance to make up for it and give the market a warning—don’t expect further rate cuts afterward.
Actually, a simple calculation makes it clear. After this cut, the interest rate will return to the neutral level of 3.5%, close to the historical norm, with little to no suppressive effect. But the problem is that inflation stubbornly sticks at 3%, refusing to loosen, still far from the Fed’s 2% target, and economic data are not as weak as expected. Logically, the Fed truly has no reason to continue easing—this is precisely what Powell has been emphasizing.
Overall, Powell’s move this time seems to be a “both, and” approach. The 25bp rate cut provides some relief to the market but is accompanied by repeated emphasis on inflation risks and a reluctance to give a clear rate cut path, given the internal divisions within the Fed. The market was originally waiting for clear policy guidance, but instead received a bunch of ambiguous statements. Although the shadow chairman leans dovish, the final decision still rests with Powell. Without precise policy guidance, the market is likely to wobble back and forth.
Actually, for tonight’s Fed rate decision, the core issue isn’t whether rates will be cut, but rather where market sentiment will be headed tomorrow. As Nick mentioned, there is a possibility of a “hawkish rate cut” tonight, which would be a shock to the already fragile market. If Powell releases hawkish language, the market could instantly become unbalanced. Of course, all judgments depend on the outcome after the announcement. Before the data is released, any speculation is just that—speculation. The key is to watch Powell’s speech tonight—the tone, wording, and rhythm will anchor the market’s direction tomorrow.
Rather than waiting to see if there will be a rate cut, the market is more concerned about whether this will be a standard hawkish rate cut!