The Federal Reserve will announce its final interest rate decision of the year at 2:00 AM this Thursday. According to CME FedWatch data, the market believes a 25 basis point rate cut is almost a certainty, with a probability exceeding 85%. If it does materialize as expected, this will be the Fed's third consecutive rate cut since September, bringing the federal funds rate down to between 3.5% and 3.75%.
For retail investors accustomed to the narrative that "interest rate cuts = good news," this seems like good news. But here's the problem: when the whole world knows that an interest rate cut is expected, the positive impact has already been priced in. Financial markets are essentially a game of expectations; prices reflect not "what happened," but "whether what happened was more unexpected than expected." The probability of a rate cut has now soared to 89%, indicating that the market has already factored this into its pricing. When the actual announcement is made on Thursday, unless the Fed pulls some unexpected move, the market is unlikely to react strongly. What will truly cause volatility is the Fed's outlook for next year. A 25bp cut is certain, but how many cuts will occur in 2026, and how long the rate-cutting cycle will last, are the real bets the market is placing. Early Thursday morning, the Fed will simultaneously release their "future interest rate path projections," a document that often has a greater impact on market trends than the actual rate cut decision. The problem is that the US government shut down for 43 days from October to November, resulting in the cancellation of the October CPI and the postponement of the November CPI to December 18th. In other words, the FOMC lacked crucial inflation data from the past two months when it held its meeting. Policymakers themselves were essentially "going blind," so their guidance was naturally vague. This vagueness meant greater room for market speculation and increased volatility. The market is currently most concerned about several points: will the dot plot change? What will Powell say? How intense is the internal debate among the committee members? Financial markets fear this kind of uncertainty most, as it directly suppresses risk appetite. The September dot plot showed that committee members were divided into two factions regarding 2025: one thought there should be 1-2 rate cuts, while the other thought at most one cut or even no cuts. Looking further into 2026, the divergence is even more pronounced, with some believing rates should be lowered all the way to 2.5%, while others insist on maintaining 4%. There's a difference of six rate cuts between the most aggressive and the most conservative. This is a highly divided Federal Reserve.
External market pricing is more dovish than the official forecast, with traders anticipating 2-3 rate cuts in 2026, while the official dot plot only suggests 1. Therefore, this Thursday's meeting is essentially a "matching of tables" between the Fed and the market: who leans towards whom? There are likely three outcomes: First, and most likely: completely in line with expectations. A 25bp rate cut, the dot plot remaining largely unchanged, and Powell offering no clear direction, only emphasizing "data-driven decision-making." In this scenario, the market reaction will be minimal; the crypto market will likely see a slight fluctuation following the US stock market before continuing its previous trend. Research reports from major institutions like Goldman Sachs and Raymond James have recently pointed to this scenario. Second, a slightly dovish lean: a 25bp rate cut, but the dot plot indicating potential for further cuts than previously expected, with Powell's tone softening, emphasizing that employment risks outweigh inflation risks. This would mean the Fed is aligning with the market, leading to a weaker dollar, improved liquidity expectations, and a strengthening of BTC and ETH, potentially even challenging recent highs. Third, a less probable but not impossible outcome: a hawkish lean. Although interest rates were cut, Powell emphasized persistent inflation and limited room for further rate cuts next year, or there were many dissenting votes, suggesting that some within the organization disagree with continuing easing. The market might interpret this as "you're overthinking it," leading to a stronger dollar, pressure on risk assets, and the greatest pressure on high-beta Altcoin. However, if the rhetoric is merely hawkish and the policy remains unchanged, the decline is usually not significant, and it might even become a buying opportunity. Because two months of inflation data are missing this time, the dot plot is unreliable, and even the committee members themselves are unsure, so the dots drawn may be more scattered. Therefore, what will truly determine the direction is likely Powell's press conference. Every word he says will be treated as a "leading indicator" by the market. If the dot plot and Powell's tone conflict, the market will be more chaotic, and volatility will be amplified. For traders, this kind of uncertain news is actually a crucial stage for improving risk management and optimizing strategies. Trading platforms like Coinstore , which provide market alerts, trend insights, and multi-currency liquidity, can often help users capture market fluctuations faster during macro event weeks, avoiding missing opportunities due to delays or missing information. Whether you're trading short-term or observing long-term trends, a stable trading environment with comprehensive tools is crucial. For investors, this means that market movements early Thursday morning will be more unpredictable than ever before. Rather than betting on whether prices will rise or fall, focus on the volatility itself. When uncertainty increases, controlling position size is always more important than directional analysis. As for tonight's JOLTs job openings data, frankly, it's not as important as social media hypes it up. It's a lagging indicator, and the current 7 million+ job openings aren't exactly in an "overheated" range; the market has long been accustomed to it gradually cooling down. If the data is similar, the market will hardly react; it's more like an appetizer before the FOMC meeting.
What's truly worth watching is Thursday's interest rate decision, dot plot, press conference, and voting results. In mid-to-late December, pay close attention to the November CPI, which will determine the market's reassessment of the pace of interest rate cuts next year. In the first quarter of next year, watch Powell's job changes and the ripple effects of Trump's policies, especially the potential for tariffs to push up inflation. If the labor market begins to deteriorate significantly, the Fed might even be forced to accelerate interest rate cuts, which would be a completely different story.
