The Federal Reserve cut interest rates in December, and the focus is not on the 25 basis points of the cut itself, but on the change in attitude—the fact that rates are being cut before inflation is fully stabilized. Three key signals are hidden behind this move:

1. The actual economic situation is much worse than it appears on the surface. Core internal data such as employment and consumption are weak, and downward pressure exceeds expectations. This is why they are willing to risk repeated inflation by cutting rates.

2. The policy focus has shifted. Previously, the priority was to suppress inflation, but now there is concern about the economy falling too hard, and the direction has shifted toward supporting the economy.

3. Future rate cuts will no longer have a clear plan; instead, they will be adjusted flexibly based on data. In the short term, this will boost risk assets like cryptocurrencies and stocks, but long-term market volatility will increase.

Market reactions also reflect this: US Treasury yields initially rose then fell; although US stocks remain optimistic, they are not willing to surge significantly. The crypto market is the most sensitive, directly treating rate cuts as a sign of a risk-on rally. However, the core reason is not proactive easing but economic pressures forcing policy adjustments.

The key to market impact over the next 3-6 months is never about whether rates are cut or not, but rather: “Why are rates being cut, how much can they be cut, and what negative economic conditions has the Federal Reserve observed?”