Tonight's Federal Reserve Rate Decision

1. Core Forward-Looking Indicators (Key References)
Based on current market data, a "hold steady" decision tonight is almost a certainty.
• CME FedWatch (Federal Reserve Watch Tool):
• Currently shows a 97.2% probability that the Fed will keep rates unchanged (3.50%-3.75%), with only a 2.8% chance of a 25 basis point cut. This indicates the market has fully priced in a "pause."
• Inflation and Employment Data:
• Inflation: Core PCE remains around 2.5%-2.8%, still some distance from the 2% target.
• Employment: December non-farm payrolls show the unemployment rate slightly decreased to 4.4%, demonstrating the labor market's resilience beyond expectations, giving the Fed confidence to "pause and observe."
• "Dot Plot" and Officials' Statements:
• Several key Fed members (such as New York Fed President Williams) have recently used the phrase **"policy is well-positioned"**. This is usually an official code for "pause."
• Political Factors:
• President Trump has recently expressed hopes for rate cuts and will soon announce a new Fed Chair candidate. This "White House vs. Fed" independence game has led to market divergence on the future rate cut path, especially in the second half of the year.
2. My View on This Decision: A "Warm" Pause
I believe the Fed will adopt an **"Hawkish Pause" (Hawkish Pause)** tonight.
1. Digesting Past Results: The effects of three consecutive rate cuts since September last year (a total of 75 basis points) are still transmitting to the real economy. Powell needs time to see if these measures have truly "revitalized" the market or just pushed up housing and gold prices.
2. Defensive Strategy: With the new Chair candidate yet to be decided and potential major changes in fiscal policy (such as new tariffs), maintaining the status quo is the safest "defense."
3. Key Focus: The decision itself is not as important as Powell's wording at the press conference. If he emphasizes "inflation is stagnating," the market will feel cautious; if he emphasizes "balancing risks," it leaves room for rate cuts in the second half of the year.
3. Impact on the Cryptocurrency Market (Crypto)
The crypto market is currently highly sensitive to "macro liquidity," and tonight's decision will impact from the following three dimensions:
• Short-term: Volatility narrowing followed by oscillation.
Since the market has already priced in "no rate cut," if the outcome is as expected, BTC may experience a short-term "sell the news" correction or sideways movement. The real driver of volatility is Powell's hint about the number of rate cuts remaining in 2026 (the market is currently debating whether it will be 1 or 2).
• Mid-term: Gold and BTC correlation.
Gold has now broken through the $5,000 level, showing strong safe-haven properties. If the Fed hints that the rate cut cycle is not over (just a pause), BTC may continue to serve as "digital gold," attracting defensive funds flowing out of US bonds.
• Risk Point: Strong US dollar.
If Powell appears too "hawkish," or even hints that rates will stay high longer (Higher for Longer), the US dollar index (DXY) will rebound, directly suppressing the rebound potential of crypto assets.
Summary Recommendations
A no-rate-cut decision tonight is a given; Powell's words are the real threat.
• For short-term traders: Pay attention to the press conference at 3:30 AM, especially whether he mentions "inflation rebound risks."
• For long-term holders: As long as the Fed does not re-enter a "rate hike cycle," the overall macro environment remains favorable for risk assets.
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