The most dangerous things are often hidden in places we can't see.

Last night, Federal Reserve Board member Waller's statement directly exposed the market's long-standing self-deception. There is no ambiguity—it's explicitly stated: to save the economy, interest rates must be cut by 100 basis points by 2026.

This is not a hint; it's a showdown. The game rules have been rewritten. The previous hardline stance of "doing whatever it takes to fight inflation" is completely over, now replaced by a survival mode of "keeping the economy from collapsing."

**The chaos inside the Federal Reserve far exceeds expectations**

The rapid shift in attitude can only mean one thing: they see the cracks. They really see them.

At the December policy meeting, for the first time since 2019, three members opposed the decision, and the opposition came from two completely opposite directions. Waller's proposal was to cut rates from the current 3.5%-3.75% to 2.5%-2.75%. But out of 19 officials, 7 opposed any rate cuts in 2026, while another 8 demanded at least a 50 basis point cut.

This level of division even made Powell uneasy, prompting him to emphasize, "The dot plot is just a reference, not a real roadmap." The implied meaning is: don't take our disagreements seriously.

**The dilemma is very real**

The Federal Reserve is now stuck in a dead end. Inflation remains high at around 3%, far above the 2% target, but the employment side is heading downward. The US unemployment rate has surged to 4.4%, hitting a new high.

On one hand, inflation hasn't been fully subdued; on the other, the job market is sweating. Continuing to raise rates could cause the economy to collapse; cutting rates now could reignite inflation. This is their true predicament.