Williams sets growth expectations, Federal Reserve's rate cuts in 2026 may slow significantly

The latest expectations from Federal Reserve New York President Williams once again stir market nerves. He stated that the U.S. economic growth rate in 2026 could be between 2.5% and 2.75%. Behind this moderate growth outlook lies a reassessment of the monetary policy space. Coupled with the Fed’s recent rate cut and the cautious attitude of officials, this signal points to a clear direction: the rate cut cycle in 2026 may not be as broad as the market imagines.

Policy Implications Behind Growth Expectations

What does 2.5%-2.75% mean

Williams’ growth expectation is at a moderate to slightly below the long-term potential growth rate of the U.S. economy. This figure seems mild, but the key lies in its delicate balance with the current economic conditions. According to the latest news, the Fed just completed a rate cut on January 12, bringing the interest rate to a range of 3.5%-3.75%, with a total of 75 basis points cut in 2025. However, Williams then stated that “there is no urgency for further rate cuts at the moment,” which is not just politeness but a calm assessment of growth and inflation prospects.

Rate cut space is severely limited

The Fed’s dot plot has already signaled clearly: only one rate cut is planned in 2026. This contrasts sharply with the market’s widespread expectation of “frequent rate cuts” in mid-2023. The reason for the compressed rate cut space is not complicated: inflation remains unfully tamed, while the employment situation is worsening. According to relevant data, 910,000 jobs have been lost. This “see-saw” dilemma between employment and inflation is the fundamental reason why officials like Williams are adopting a cautious stance.

Key Timing Points This Week Will Shape Market Expectations

Today’s Two “Trials”

Williams’ speech and December CPI data will both be released today (January 13). Williams’ speech is scheduled for 07:00 Beijing time, while the December CPI data will be announced at 21:30 ET. The time difference between these two events is less than 15 hours, leaving significant room for market sentiment to fluctuate.

If CPI data shows stubborn inflation, officials like Williams and other FOMC members may further reinforce expectations of a “pause in rate cuts.” According to relevant information, next week the Fed officials will speak intensively, including Bostic, Barkin, Moussad, and others, who may unify their tone to suppress rate cut expectations.

Liquidity expectations in the crypto market are being reshaped

This shift is crucial for digital assets. The Fed’s policy shift from “aggressive rate cuts” to “cautious observation” means that the pace of global liquidity easing will be slower than expected. This directly impacts the allocation logic of risk assets. However, from another perspective, the increased transparency and independence of Fed policies (according to relevant information, Powell has hired a law firm to handle political pressure) actually provide a more predictable policy environment for the market.

Summary

Williams’ expectation of 2.5%-2.75% growth essentially means: the U.S. economy is growing enough to support the current policy stance but not enough to justify aggressive easing. Considering the stubborn inflation and worsening employment reality, the Fed in 2026 is more likely to “hold steady” rather than “act frequently.” Next week’s CPI data and officials’ speeches will be key windows for the market to reprice liquidity expectations. For digital assets, this implies a shift from “waiting for easing” to “adapting to balance.”