Williams pours cold water: No reason for rate cuts in the short term, market rate cut expectations are further dampened

The New York Fed President Williams just delivered a speech, sending a clear hawkish signal. He stated there is no reason to cut interest rates in the short term and expressed optimism about the US economic outlook for 2026. This statement directly challenged the market’s previous expectations of a 50-75 basis point rate cut this year, further suppressing the upside potential of risk assets.

Key Points of Williams’ Speech

Optimistic economic outlook, maintaining high interest rates

Williams expects the US economy to remain healthy through 2026. His specific forecasts include:

These data support his core view: current monetary policy conditions are favorable, helping to support labor market stability and bring inflation back to the 2% target. In other words, the economy is performing well, and there is no need to rush into rate cuts.

No short-term reason to cut rates

Williams’ remarks are straightforward. In his view, the current policy rate level is appropriate, and there is no need for adjustments in the near term. This sharply deviates from market expectations that the Fed might start a rate cut cycle in 2026.

What This Means for the Market

Rate cut expectations continue to cool

According to recent reports, market expectations for a 50-75 basis point rate cut in 2026 have already begun to diminish. Williams’ speech further confirms this trend. Over the past week, Fed officials have spoken intensively, with multiple voting members indicating the same direction: maintaining high interest rates.

US dollar strengthens, risk assets under pressure

When the Fed signals a hawkish stance, it usually pushes the US dollar index higher. Based on analysis, the dollar’s movement has become a key restraining factor in the current market. The hawkish tone from the Fed combined with positive US economic data will further drag down risk assets, including gold. For the cryptocurrency market, a strengthening dollar often means reduced risk appetite and tightening liquidity.

Technical pressure

Data shows that Bitcoin spot ETFs have experienced four consecutive days of net outflows, and Ethereum spot ETFs have also seen three days of net outflows. This reflects market caution under the hawkish signals from the Fed.

Upcoming Key Focus Points

Williams’ speech is just the beginning. According to recent reports, several important events are scheduled this week:

• US December CPI data will be released today at 21:30, a key factor in determining the near-term market direction
• Fed officials (Bostic, Barkin, Musialem, etc.) will also speak intensively
• The Fed’s Beige Book and retail sales data will be released gradually

If CPI data meets or falls below expectations, it could give the market some breathing room. But if inflation remains stubborn, the Fed may further reinforce its stance of maintaining high interest rates.

Summary

Williams’ speech reaffirms the Fed’s determination to keep interest rates high through the first half of 2026. The statement that there is no short-term reason to cut rates may seem simple, but it is actually a systematic blow to market expectations of rate cuts. Supported by economic data, manageable inflation pressures, and stable labor markets, these factors give the Fed confidence to maintain its current policy stance. For the crypto market, this means the dollar’s strength cycle may continue, and risk assets will face ongoing pressure. The current market focus has shifted to tonight’s CPI data — which will determine the Fed’s next move and the potential rebound space for risk assets.