Fed Cuts Rates Again. Markets Eye Pivot, But Powell Remains Cautious

The U.S. central bank has cut interest rates by 25 basis points for the third time this year. While this move was widely anticipated, investors are now watching closely to see whether the Federal Reserve is preparing for a dovish pivot — or if it will stick to its hawkish stance.

Fed Lowers Rates Again, Majority Votes in Favor The Federal Open Market Committee (FOMC) reduced the target range for the federal funds rate from 3.75–4% to a new range of 3.5–3.75%. Nine members voted in favor of the cut, while three dissented — one of whom supported a 50 bps cut. This marks the third rate cut of the year, following previous reductions in September and October. However, Fed Chair Jerome Powell and other officials have indicated that they may pause further cuts unless inflation moves closer to the 2% target.

All Eyes on Powell’s Press Conference Market attention now shifts to Fed Chair Jerome Powell’s press conference, which will offer signals on whether the Fed leans hawkish or dovish moving forward. For now, the message remains clear: further decisions will depend on incoming data rather than a pre-set path of easing. A key upcoming event is the Producer Price Index (PPI) report, scheduled for release by the Department of Labor on January 14, just two weeks before the next FOMC meeting.

Fed to Begin Treasury Purchases – Hidden QE? In addition to the rate cut, the Fed also announced that starting December 12, it will begin purchasing U.S. Treasury bills, planning to buy up to $40 billion within 30 days. Some analysts, including James Lavish, describe this move as a form of quantitative easing (QE), even though the Fed refers to it as “reserve management.” The goal is to inject more liquidity into the markets, which could have a positive impact on risk assets such as cryptocurrencies. Commentator Milk Road called the program “a hidden version of QE”, noting that while rate cuts affect policy direction, bond purchases affect the plumbing of the financial system — liquidity, cash flow, and investor confidence.

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