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Shaw, Bitcoin Vision
October 30,The Federal Reserve’s latest decision to lower the benchmark interest rate by 25 basis points to 3.75%-4.00% is in line with market expectations.However, the Federal Reserve’s FOMC statement stated thatThis interest rate decision encounters the rare situation of “eagle and dove flying together”.subsequentlyPowell also unexpectedly made a “hawkish” statement at the press conference, lowering expectations on whether the Federal Reserve can continue to cut interest rates in December, triggering market concerns.After the announcement of the Federal Reserve’s interest rate decision, major markets around the world reacted strongly. U.S. stocks, U.S. bonds, gold, and cryptocurrencies fell sharply during the session, while the U.S. dollar rose.
The Federal Reserve cut interest rates in October as scheduled, but why internal differences still cannot be alleviated. What is the reason for Powell’s unexpected “hawkish” stance? How to interpret it, and what will be the next direction of the market?
1. The interest rate cut in October came as expected, but there are doubts whether the rate cut can be continued in December.
Early this morning, the Federal Reserve announced its October interest rate decision.Lower the benchmark interest rate by 25 basis points to 3.75%-4.00%, cutting interest rates for the second consecutive meeting, in line with market expectations.It is also the fifth interest rate cut since September 2024.However, the subsequent FOMC statement and a series of remarks from Powell’s press conference lowered expectations of whether the Fed can continue to cut interest rates in December, triggering market concerns.According to the latest CME “Fed Watch”,The probability of the Fed cutting interest rates by 25 basis points in December is 67.8%,The probability of keeping interest rates unchanged is 32.2%.The probability that the Fed will cut interest rates by 25 basis points cumulatively by January next year is 56%, the probability of keeping interest rates unchanged is 21.5%, and the probability of cumulative interest rate cuts by 50 basis points is 22.5%.Prediction market Polymarket data shows that the market is betting on the Federal Reserve’s December interest rate decision.Before the announcement of this resolution, the market was betting that the probability of a further 25 basis point interest rate cut in December was 90%. After the announcement of the resolution, the probability has dropped to 69%.The market is betting that the probability of suspending interest rate cuts in December has risen to 30%.
After the announcement of this interest rate decision, major global asset markets reacted strongly.U.S. stocks, U.S. bonds, gold, and cryptocurrencies fell sharply during the session, with Bitcoin and Ethereum both falling by more than 3%.U.S. bond yields rose across the board, with both the 2-year and 10-year bonds rising by more than 10 basis points, and the U.S. dollar once returned above the 99 mark.NVIDIA reached a new high, closing up nearly 3%, with its market value exceeding US$5 trillion.In the end, with the support of Nvidia, the Nasdaq closed up 0.55%, the S&P 500 closed flat, and the Dow fell 0.16%.
The market has long expected the Federal Reserve’s decision to cut interest rates in October and is also looking forward to stimulating the global economy and major asset markets.ButWith this FOMC statement and Powell’s policy explanation at the press conference, the market has doubts about whether the Federal Reserve can continue to cut interest rates in December., also caused concerns among investors.
2.FOMC statement still shows divisions within the Fed
This timeThe Federal Reserve’s FOMC statement announced that it will end the balance sheet reduction on December 1.After the balance sheet reduction ends on December 1, principal redemptions from mortgage-backed securities will be reinvested in short-term Treasury securities.Effective December 1, all principal payments on maturing U.S. Treasury securities will be rolled over.The FOMC statement also announced that it would lower the discount rate from 4.25% to 4% and the overnight reverse repurchase rate from 4% to 3.75%.The statement said that existing data show that the economy is expanding at a moderate pace and the uncertainty about the economic outlook remains high.Inflation has increased this year and remains at a high level.The Committee closely monitors risks on both sides of the dual mandate and believes that downside risks to employment have increased.
The Federal Reserve’s FOMC statement showed:This time the Federal Reserve’s interest rate decision encountered a rare situation of “both eagles and doves flying together”.Federal Reserve Board of GovernorsFor the second consecutive meeting, Stephen Millan advocated a more aggressive rate cut, believing that the rate should be cut by 50 basis points in one go instead of the actual 25 basis points.;Meanwhile, Kansas City Fed PresidentSchmid took a hawkish stance and opposed any interest rate cuts, advocating keeping interest rates unchanged.; Other directors voted in support of this Fed interest rate resolution.This kind of meeting with two-way dissent last occurred in September 2019, reflecting the significant divergence in the Fed’s internal judgment on the economic outlook.
The FOMC statement showed clear divisions within the Fed, indicatingDuring the “shutdown” of the U.S. government and the lack of a large amount of important economic data for reference, the Federal Reserve lacks a clear and unified understanding of the economic situation and how to formulate future policies..
Three.Powell’s unexpected “hawkish” stance raises concerns
Federal Reserve Chairman Powell subsequently explained the interest rate cut decision and the economic situation at a press conference, and answered reporters’ questions.Powell said,Existing data indicate that the U.S. economic outlook has not changed much and is expanding at a moderate pace.Pre-shutdown data suggested the economy may be on a more solid track; the government shutdown will temporarily drag on economic activity.He expressedInflation levels are still slightly high, and inflation expectations have increased recently; The Fed needs to manage the risk of inflation lasting longer and has the responsibility to ensure that it does not become a persistent problem.Regarding the impact of tariffs, Powell said that under a reasonable baseline scenario, the impact of tariffs on inflation will be short-lived.
Regarding labor and employment issues, Powell said,The labor market appears to be gradually cooling;Available evidence suggests that layoffs and hiring remain low; downside risks to employment appear to have increased.He said that state unemployment benefit application data sent a signal of business as usual; the low number of unemployment benefit applications showed that the labor market was only gradually cooling, and there was no obvious rapid decline;If data shows an improvement in the job market, it could influence decisions.
Regarding the end of the Fed’s balance sheet reduction, Powell said that money market pressure requires immediate adjustments to the balance sheet operations; the balance sheet will enter the next stage in December and will remain stable in the short term.Money market liquidity has tightened in the past three weeks, and there is little benefit from continuing to reduce balance sheets; bank reserves are only slightly above sufficient levels, and balance sheets have decided to give the market some time to adapt.He said there were “clear signs” that it was time to stop quantitative tightening; reinvestment strategies would bring the weighted average maturity closer to the stock of outstanding securities.
Powell gave an explanation for this Federal Reserve interest rate decision.Powell said that there has been no significant deterioration in any area of the economy and that overall, the economic situation is good.He said he believes the Fed has taken the right actions so far this year.Powell reiterated that there is no risk-free policy path and that the balance of risks has shifted.Fed rate cut is ‘another step towards a more neutral policy stance’; The risk management logic also applies to today’s interest rate cut. The October rate cut has the same risk management logic as the September rate cut.He said the Fed cannot address both employment and inflation risks with just one tool.Powell also said that an interest rate cut in December is “far from” a foregone conclusion, suggesting that the Fed is unsure whether to continue cutting interest rates in December..
The market’s expectations for an interest rate cut in October have been exhausted, and they still expect the Federal Reserve to continue to cut interest rates in December to stimulate the continued rise of major assets. However,Powell’s unexpectedly “hawkish” stance casts a shadow on market confidence.
Four.How to interpret the Federal Reserve’s decision
In response to this Federal Reserve decision,“Fed’s mouthpiece” Wall Street Journal reporter Nick TimiraosCommenting on Fed Chairman Powell’s speech, he said: “Powell’s press conference showed that the FOMC as a whole does not agree with the market’s previous high price for a December interest rate cut. NickTimiraos said the October FOMC meeting was somewhat different in the following ways.The September dot plot showed divisions within the committee: a majority favored continuing to cut rates as a means of risk management, but there was also a sizable minority that saw no need for rate cuts.Typically, data can help reconcile this disagreement.However, with less high-level data to refine the outlook between FOMC meetings, members have less reason to change their stance.
Inflation Insights analyst Omair SharifIt is believed that the U.S. government shutdown and the lack of related official economic data may hinder the Federal Reserve’s plan to cut interest rates for the third consecutive time in December.Without official data reflecting economic activity in October and November when they meet on December 10, will officials feel comfortable cutting rates again?It may be difficult for them to agree on another rate cut, especially given the divisions within the FOMC as shown in September’s dot plot.
AnalystJoseph Richter“The bearish flattening of the yield curve, after Powell said a December rate cut was not a certainty, is overdone in our view.“While the Fed may not cut rates at every meeting (although we think they will), we view this comment as an attempt to regain the option.The market will view this as hawkish, but that may not come to fruition.”
Chief Economist, New York Mellon Investment Management Company,Former Federal Reserve Senior Advisor Vincent ReinhartHe believes that given the data vacuum, “the data has to prove that further easing is unreasonable, which is a high threshold,” so he added, “It will be really difficult for them not to cut interest rates in December.It’s easier to keep going than to stop.”
Dean, Purdue University School of Business,Former St. Louis Fed President James BullardIt believes that the prospect of a rate cut in December is “more subtle than the market currently believes.”He noted that strong consumer spending and economic growth, coupled with the recent setback in inflation, may be grounds for slowing the pace of rate cuts.”You’re betting too much on a slowdown in the non-farm payrolls report,” Bullard said.He also questioned whether policymakers have truly adapted to a new normal in which 50,000 new jobs per month is “completely acceptable.”
In addition,Trump criticized the Fed on Thursday, again targeting Fed Chairman Jerome Powell, accusing it of being slow to cut interest rates.In his speech in South Korea, Trump referred to “Jerome ‘Too Late’ Powell” and said he would not let the Fed raise interest rates because of concerns about inflation three years from now.He expects the U.S. economy to grow by 4% in the first quarter of 2026, well above economists’ forecasts.The comments underscored the tense relationship between Trump and the Fed.
5.What’s next for the market?
After the Federal Reserve’s October interest rate decision is announced, what will happen next for major asset markets, including cryptocurrencies?The market made the following interpretation.
1. Glassnode express your opinionAccording to the report, the market continues to struggle above the short-term position cost price (about 113,000 US dollars), which is a key area where the momentum of the bulls and bears competes.Failure to regain this level could lead to a further pullback to around the actual price for active investors (approximately $88,000).Glassnode said that the market’s current calm is conditional, but if the Fed’s actions deviate from expectations, this calm will become fragile.
2. Michael Saylor, founder of StrategyIn an interview, he published the latest Bitcoin price prediction, reaching $150,000 by the end of the year, with a target of $1 million in the next 4 to 8 years.
3. Matrixport posted a messageAccording to the report, Bitcoin is still fluctuating in a range; in comparison, U.S. stocks have repeatedly set new historical highs driven by the AI boom.There is a certain similarity with the rhythm that appeared last year: after a long period of low volatility consolidation, the price experienced a phased and rapid upward trend in about three weeks.The current narrow range of fluctuations puts higher demands on traders’ patience.The short-term outlook is mainly on the sidelines, while the mid-term outlook remains unchanged.If the Fed remains dovish and continues to cut interest rates, the market will be more likely to wait for clearer external driving signals.A similar rhythm is also common in history: after a long period of trading, fluctuations will be concentrated in a short period of time.
4. Crypto Analyst @IamCryptoWolfAccording to a post on the social platform, ETH is undergoing an expanding wedge backtest, and the previous resistance level now serves as a solid support level.November looks set to see a steady consolidation, with a possible breakout at the end of the month, followed by an acceleration in gains in December.
5. Michael Rosen, chief investment officer of Angeles InvestmentsIt said that this rate cut was expected by the market, but Powell’s remarks weakened the market’s optimism about another rate cut in December.Powell’s comments reflected tensions within the Fed over whether to cut interest rates further, especially as inflation remains elevated and exceeds the Fed’s own goals.Investors should expect inflation to likely remain high for an extended period, which will limit the scope of further monetary easing.The comments sent stocks retreating as investors had expected a boost from more rate cuts.But this is only a temporary reaction.It is still corporate earnings that ultimately drive stocks, and earnings performance remains strong, so we remain fully positioned in the portfolio.
6. Investment company Aureus Asset ManagementThe market expects the Fed to cut interest rates at least before December, but the risk of rising inflation remains high.Despite all the tariff negotiations, prices remain high.We’ve been looking more at fixed income, and we’re finding that volatility can actually be reduced, as opposed to just being long equities as we have been in the past.
