Why isn't the Federal Reserve rushing to cut interest rates? Williams' speech reveals the real reason

Current Beijing Time 07:03, Federal Reserve New York President Williams is delivering a speech. His core message is straightforward: the Federal Reserve must lower inflation without causing undue risks to the labor market. This statement may seem simple, but it actually reflects the real dilemma faced by the Fed today. At a time when market expectations for rate cuts are mounting, this message is particularly crucial.

Policy Implications of Williams’ Speech

As a permanent FOMC voter and New York Fed President, Williams’ remarks represent internal thinking within the Federal Reserve regarding policy direction. The key point of this statement is balance — controlling inflation while protecting the employment market. This is not a new issue, but it is especially important right now.

According to relevant information, Fed officials’ expectations for rate cuts in 2026 have noticeably cooled. The previously market-anchored expectation of “50-75 basis points rate cut” is loosening. Williams’ speech just confirms this shift: the Fed will not cut rates just for the sake of cutting, provided that inflation truly returns to the target level and employment is not sacrificed.

Background: Why Say These Now?

Next week is the first “Data Super Week” of 2026, with the US set to release December CPI data at 21:30 on January 13. This data is crucial for market and Fed policy judgments. If inflation remains sticky, it will further confirm that the Fed needs to maintain higher rates for a longer period.

Why are Fed officials speaking intensively before and after the CPI data release? It’s a signal to the market: regardless of the data, the Fed’s policy stance is clear — no hasty rate cuts.

Market Impact Pathways

Williams’ speech has a direct impact on the crypto market:

1. US Dollar Trend: If the Fed insists on not rushing to cut rates, the dollar will remain relatively strong. A strong dollar typically puts pressure on assets priced in USD, like Bitcoin.

2. Risk Asset Sentiment: Expectations of the Fed maintaining high interest rates will dampen risk asset rallies. This week, Bitcoin spot ETFs have experienced four consecutive days of net outflows, and Ethereum spot ETFs have seen three days of net outflows, reflecting market concerns about delayed rate cuts.

3. Gold and Safe-Haven Assets: Conversely, the Fed’s cautious stance supports safe-haven assets like gold. This week, spot gold has risen over $177, and spot silver over $7, partly due to market reassessment of Fed policy.

Summary

Williams’ speech is not an announcement of new policy but a clarification of the Fed’s priorities. In the dilemma between inflation and employment, the Fed has chosen a more cautious approach. This suggests that market expectations for the pace of rate cuts in 2026 may need to be adjusted again. Next week’s CPI data and subsequent officials’ speeches will continue to shape market expectations. The crypto market should closely monitor this policy evolution. For investors, understanding this balancing logic of the Fed is more important than simply expecting rate cuts.