On October 30, the Federal Reserve's latest decision cut the benchmark interest rate by 25 basis points to 3.75%-4.00%, meeting market expectations. However, the Fed's FOMC statement indicated that this rate decision encountered the rare situation of both "hawks and doves dissenting." Subsequently, Powell unexpectedly adopted a relatively "hawkish" stance during the press conference, lowering expectations for the Fed's ability to continue rate cuts in December, sparking market concerns. After the Fed's rate decision was announced, major global markets reacted strongly: U.S. stocks, U.S. bonds, gold, and cryptocurrencies plummeted intraday, while the U.S. dollar surged.

The Fed's October rate cut arrived as scheduled, but why can't internal disagreements be alleviated? What are the reasons for Powell's unexpected "hawkish" stance, how should it be interpreted, and where is the market headed next?

I. October Rate Cut Arrived as Scheduled, Doubts Remain About Continued Cuts in December

In the early hours of this morning, the Fed announced its October rate decision, cutting the benchmark rate by 25 basis points to 3.75%-4.00%. This marks the second consecutive meeting with a rate cut, aligning with market expectations. It is also the fifth rate cut since September 2024. However, the subsequently released FOMC statement and a series of remarks from Powell's press conference lowered expectations for the Fed's ability to continue rate cuts in December, triggering market concerns. According to the latest CME "FedWatch Tool," the probability of a 25 BP rate cut in December is 67.8%, while the probability of holding rates steady is 32.2%. The probability of the Fed cutting rates cumulatively by 25 BPs by next January is 56%, the probability of holding rates steady is 21.5%, and the probability of cumulative cuts of 50 BPs is 22.5%. Prediction market Polymarket data shows market bets on the Fed's December rate decision. Before this decision was announced, the market bet probability for a continued 25 BP cut in December was 90%; after the announcement, this probability dropped to 69%. Meanwhile, the market bet probability for a pause in rate cuts in December rose to 30%.

After the rate decision was announced, global major asset markets reacted strongly. U.S. stocks, U.S. bonds, gold, and cryptocurrencies plummeted intraday, with Bitcoin and Ethereum both falling over 3% at one point. U.S. Treasury yields surged across the board, with the 2-year and 10-year yields both rising over 10 basis points. The U.S. dollar once climbed back above the 99 mark. Nvidia hit a new record high, closing up nearly 3%, with its market capitalization breaking through $5 trillion. Ultimately, supported by Nvidia, the Nasdaq closed up 0.55%, the S&P 500 closed flat, and the Dow Jones fell 0.16%.

The market had long anticipated the Fed's October rate cut decision and hoped it would stimulate the global economy and major asset markets. However, with the policy explanations from the FOMC statement and Powell's press conference, doubts about the Fed's ability to continue rate cuts in December have emerged, also raising concerns among investors.

II. FOMC Statement Still Shows Fed Internal Divisions

This Fed FOMC statement announced that balance sheet runoff (quantitative tightening, QT) will end on December 1. After ending QT on December 1, the principal payments from mortgage-backed securities will be reinvested in Treasury bills. Starting December 1, all maturing U.S. Treasury principal payments will be rolled over. The FOMC statement also announced a reduction in the discount rate from 4.25% to 4%, and the overnight reverse repurchase rate from 4% to 3.75%. The statement said available data indicates the economy is expanding at a moderate pace, and uncertainties regarding the economic outlook remain elevated. Inflation has increased this year and remains elevated. The Committee is closely monitoring risks to both sides of its dual mandate and believes downside risks to employment have increased.

The Fed FOMC statement showed that this Fed rate decision encountered the rare situation of both "hawks and doves dissenting." Fed Governor Stephen Milan argued for a more aggressive cut for the second consecutive meeting, believing a 50 BP cut should have been implemented instead of the actual 25 BP cut. Meanwhile, Kansas City Fed President Schmid stood on the hawkish side, opposing any rate cut and advocating for holding rates steady. All other Governors voted in support of this Fed rate decision. The last meeting with such two-way dissent occurred in September 2019, reflecting significant divergence within the Fed regarding the economic outlook.

The FOMC statement displayed clear internal divisions within the Fed, indicating that against the backdrop of the U.S. government "shutdown" and the lack of substantial important economic data for reference, the Fed lacks a clear and unified understanding of the economic situation and how to formulate future policy.

III. Powell's Unexpected "Hawkish" Stance Sparks Concerns

Fed Chairman Powell subsequently explained the rate cut decision and economic situation at a press conference and answered reporters' questions. Powell stated that available data suggests the U.S. economic outlook hasn't changed much and is expanding moderately. Pre-shutdown data indicated the economy might be moving towards a firmer track; the government shutdown will temporarily drag on economic activity. He said inflation levels remain somewhat elevated, and recent inflation expectations have risen; the Fed needs to manage the risk of inflation persisting longer and has a responsibility to ensure it does not become a persistent problem. Regarding the impact of tariffs, Powell said that under a reasonable baseline scenario, the effect of tariffs on inflation would be transient.

Addressing labor and employment issues, Powell said the labor market appears to be gradually cooling; available evidence suggests layoffs and hires remain low; downside risks to employment appear to have increased. He said state unemployment benefit claims data signals business as usual; low unemployment claims indicate the labor market is only gradually cooling, not slowing sharply; if data shows improvement in the labor market, it would influence policy decisions.

Regarding the Fed's plan to end balance sheet reduction, Powell said money market pressures require immediate adjustment to balance sheet operations; December will begin the next phase for the balance sheet, which will remain stable in the short term. Money market liquidity has tightened over the past three weeks, and continuing QT offers little benefit; bank reserves are only slightly above ample levels, and the balance sheet decision gives the market some time to adapt. He said there are "clear signs" that it's time to stop quantitative tightening; the reinvestment strategy will bring the weighted average maturity closer to the stock of outstanding securities.

Regarding this Fed rate decision, Powell provided explanations. Powell said no sector of the economy shows significant deterioration, and overall, the economic situation is very positive. He said he believes the Fed has taken the right actions so far this year. Powell reiterated that there is no zero-risk policy path, and the balance of risks has shifted. The Fed's rate cut is "another step towards a more neutral policy stance"; the risk management logic applies equally to today's cut, and the October cut shares the same risk management logic as the September cut. He said the Fed cannot rely on just one tool to address both employment and inflation risks simultaneously. Powell also stated that a rate cut in December is "far from" a done deal, hinting that the Fed is uncertain about continuing rate cuts in December.

Market expectations for an October rate cut were fully priced in, and the market still hopes the Fed will continue cutting rates in December to stimulate further gains in major assets. However, Powell's unexpectedly hawkish tone has cast a shadow over market confidence.

IV. How to Interpret the Fed's Current Decision

Commenting on Fed Chairman Powell's speech regarding this Fed decision, "Fed Whisperer" Wall Street Journal reporter Nick Timiraos said: "Powell's press conference suggests the FOMC as a whole did not认同 (agree with) the market's previous high pricing for a December rate cut." Nick Timiraos said the October FOMC meeting was different in the following aspects. The September dot plot showed divisions within the Committee: a majority favored continuing rate cuts as a risk management tool, but a significant portion saw no need for cuts. Normally, data can help reconcile this divergence. However, with fewer high-level data points between FOMC meetings to refine the outlook, members had less reason to change their stance.

Inflation Insights analyst Omair Sharif believes the U.S. government shutdown and the lack of related official economic data could hinder the Fed's plan for a third consecutive rate cut in December. Would officials feel comfortable cutting rates again if, by the December 10 meeting, there is no official data reflecting October and November economic activity? It might be difficult for them to reach a consensus on another cut, especially considering the FOMC divisions shown in the September dot plot.

Analyst Joseph Richter said: "The bear flattener of the yield curve after Powell said a December cut was not a done deal seems a bit overdone in our view." "While the Fed may not cut at every meeting (though we think they will), we see these comments as an attempt to regain optionality. The market will read this as hawkish, but it may not materialize."

Vincent Reinhart, Chief Economist at Dreyfus and a former Fed senior advisor, believes that given the data vacuum, "the data have to prove that further easing is unjustified, which is a high bar," so he added, "It's really hard for them not to cut in December. It's easier to keep going than to stop."

James Bullard, Dean of the Purdue University Business School and former St. Louis Fed President, believes the prospect of a December rate cut is "a bit more nuanced than the market currently believes." He pointed out that strong consumer spending and economic growth, coupled with recent inflation setbacks, could be reasons to slow the pace of rate cuts. "You placed too many bets on the slowdown in the nonfarm payrolls report," Bullard said. He also questioned whether policymakers have truly adapted to a new normal where adding 50,000 jobs per month is "perfectly acceptable."

Additionally, on Thursday, Trump criticized the Fed, again targeting Fed Chairman Powell, accusing him of being slow to act on rate cuts. In a speech in South Korea, Trump referred to "Jerome 'Too Late' Powell" and said he wouldn't let the Fed raise rates due to inflation concerns three years out. He predicted the U.S. economy would achieve 4% growth in Q1 2026, far above economists' forecasts. These remarks highlight the tension between Trump and the Fed.

V. Where is the Market Headed Next?

After the Fed's October rate decision was announced, where are major asset markets, including cryptocurrencies, headed next? The market offered the following interpretations.

1. Glassnode expressed the view that the market continues to struggle above the short-term holder cost basis (approximately $113,000), which is a key area where bullish and bearish momentum clash. If it fails to stabilize above this level, it could fall further towards the active investor realized price (approximately $88,000). Glassnode stated that the current market calm is conditional and will become fragile if the Fed's actions deviate from expectations.

2. Strategy founder Michael Saylor gave his latest Bitcoin price prediction in an interview: reaching $150,000 by the end of the year and targeting $1 million in the next 4 to 8 years.

3. Matrixport posted an article stating that Bitcoin remains in range-bound consolidation; in contrast, U.S. stocks, driven by the AI boom, have repeatedly refreshed historical highs. There are some similarities to the rhythm seen last year: after a prolonged period of low volatility consolidation, prices experienced a phase of relatively rapid upward movement in about three weeks. The current narrow fluctuations demand more patience from traders. Short-term trading is mainly wait-and-see, while the medium-term pattern remains unchanged. If the Fed maintains a dovish stance and continues cutting rates, the market is mostly waiting for clearer external driving signals. History also shows similar rhythms: after long consolidation, volatility tends to be released concentratedly within a short period.

4. Crypto analyst @IamCryptoWolf posted on social media that ETH is undergoing an expanding wedge retest, where previous resistance now acts as solid support. November appears poised for steady consolidation, with a potential breakout at the end of the month and accelerated gains in December.

5. Michael Rosen, Chief Investment Officer of Angeles Investments, said this rate cut was within market expectations, but Powell's comments dampened market optimism for another cut in December. Powell's stance reflects the tension within the Fed regarding further rate cuts, especially while inflation remains high and above the Fed's own target. Investors should expect inflation to potentially remain high for an extended period, which will limit the extent of further monetary easing. Affected by these comments, stocks retreated as investors had expected more rate cuts to provide a boost. But this is only a temporary reaction. Ultimately, corporate earnings still drive the stock market, and earnings remain strong, so we maintain a fully invested position in our portfolios.

6. Investment firm Aureus Asset Management said the market expects the Fed to cut rates at least until December, but the risk of rising inflation remains significant. Despite all the tariff talks, prices remain high. We have been focusing more on fixed income, where we find volatility can actually be reduced, rather than just being long stocks as in the past.