Next Thursday at midnight Beijing time, the Federal Reserve will release the minutes from its October policy meeting, and investors are grappling with growing uncertainty over the future path of US interest rates.
Last month, the Fed lowered its benchmark rate to a range of 3.75%–4%. However, investors hoping for Chair Jerome Powell to signal another rate cut in December were disappointed.
Prior to the October meeting, markets had fully priced in a 25-basis-point cut for December. Powell’s statement that "further rate cuts by year-end are not a foregone conclusion" quickly reshaped market expectations.
01 Clear Divisions Within the Federal Reserve
In mid-November, Fed officials made a series of public statements, sending mixed signals about a possible rate cut in December. Internal divisions within the Fed have become pronounced, and debate over the pace of easing has intensified.
Dovish Fed Governor Stephen Milan has consistently called for a faster shift toward easing, advocating a 50-basis-point rate cut in December.
Milan emphasized that monetary policy operates with a lag of 12 to 18 months, stating, "If we base policy solely on current data, we’re essentially looking backward."
On the hawkish side, officials worry that easing too soon could undermine progress against inflation. St. Louis Fed President Alberto Musalem expects the US economy to rebound significantly in the first quarter of 2026.
Musalem warned that high inflation is hitting low- and middle-income households especially hard, reiterating that the Fed must stick to its inflation target and bring the rate down to 2%.
Centrists are taking a more cautious stance. Boston Fed President Susan Collins made it clear that the threshold for further rate cuts in the near term is "relatively high."
02 The Challenge of Missing Data
A 43-day shutdown of the US federal government disrupted the release of key economic data, adding to the uncertainty surrounding Fed policy.
During this period, two scheduled releases of the Consumer Price Index and employment figures were missed. Even though the government has reopened, some indicators have not been fully restored.
White House Council of Economic Advisers Chair Kevin Hassett admitted, "The household survey didn’t get completed, so we only have half of the jobs report. We’ll never know what the unemployment rate was in October."
These missing unemployment statistics are crucial for analyzing whether the recent deterioration in the labor market is driven by economic factors or immigration policy.
Morgan Stanley analysts noted in a client report that the lack of data and delays in employment indicators mean "the Fed will face an information gap when making decisions at the December meeting."
03 Rapid Shift in Market Expectations
As Fed officials deliver conflicting messages, market expectations for a December rate cut have dropped sharply.
Interest rate futures now show traders assign less than a 50% probability to a rate cut in December, compared to about 95% just a month ago.
According to CME FedWatch data, the probability of a 25-basis-point cut in December now stands at 66.9%, with a 33.1% chance that rates will remain unchanged.
This uncertainty has fueled increased market volatility. Tech stocks have suffered steep losses recently, with the Nasdaq dropping more than 2%, partly due to concerns over AI investments and unclear rate policy.
Precious metals like gold and silver have also seen significant declines. Comex gold fell over 2%, dropping below $4,050 per ounce, while silver plunged 4.7% to $50.7 per ounce.
04 Diverging Views Among Economists
Given the complex economic environment, institutions hold markedly different views on the Fed’s next steps.
Abigail Watt, US economist at UBS, analyzed, "Overall, the labor market remains relatively weak, which is one of the main reasons we expect the Federal Open Market Committee to cut rates again in December. The risk, however, is that subsequent data could upend this expectation of weakness."
Morgan Stanley analysts stated, "Data availability remains limited, but we believe the existing data makes a December rate cut by the Fed likely."
Qatar National Bank expects the Fed will "moderately" continue its easing cycle, cutting rates again in December and once more in early 2026, ultimately lowering the federal funds rate to 3.5%.
05 Impact on the Cryptocurrency Market
The Fed’s interest rate policy has long served as a global barometer for asset prices, and the cryptocurrency market is no exception.
Uncertainty over the direction of rates has increased volatility for risk assets, including cryptocurrencies.
Historical data shows that when the Fed maintains high rates, risk assets typically come under pressure; when the Fed cuts rates, risk assets tend to find support.
The current divisions within the Fed over rate policy may lead markets to remain cautious ahead of the release of the meeting minutes.
Crypto investors should closely monitor next Thursday’s Fed minutes and key economic data in the coming weeks, as these will offer important clues for the December rate decision.
Outlook
With leadership changes at the Fed—Atlanta Fed President Raphael Bostic announcing an early retirement—the future direction of Fed policy has become even more uncertain.
This debate over interest rates is not only central to Fed decision-making but will also directly impact global capital markets, influencing the flow of funds and risk appetite in the cryptocurrency sector.
While the Fed minutes may not provide definitive answers, they can reveal policymakers’ concerns and inclinations.
For investors, staying flexible amid uncertainty is more important than holding a rigid stance.
