What will the Fed's next move on interest rate cuts look like? This question directly determines your investment direction.

**Where are interest rates now**

The federal funds rate is stuck in the 3.50%-3.75% range, the result of the last 25 basis point cut in December last year. It sounds like rate cuts are continuing, but the question is—will they keep going in 2026?

There is no consensus within the Federal Reserve. The official dot plot predicts only one rate cut (25 basis points), but big institutions like Goldman Sachs and Morgan Stanley are singing a different tune—they expect 2-3 cuts (totaling 50-75 basis points). The market currently sees only about a 15% chance of a cut in January, instead betting on March or June. This divergence itself is a signal—everyone is waiting for data.

**If rate cuts really continue, who will benefit**

The economy will breathe a sigh of relief. Borrowing costs for businesses will decrease, encouraging more expansion and investment. Consumers will find mortgage and auto loan rates cheaper, leading to more home purchases. Economists have raised their 2026 GDP growth forecast to around 2.3%. Historically, during rate cut cycles, the stock market (like the S&P 500) tends to perform well because low interest rates improve corporate profit outlooks.

Cryptocurrency investors will benefit more directly. Increased liquidity means both institutions and retail investors are more willing to take risks, and money naturally flows into high-risk assets like Bitcoin. If there are indeed several cuts in 2026, we might see a wave of institutional funds re-entering the crypto market. The dollar will also be pressured lower, benefiting gold and emerging market assets.

**But don’t celebrate too early**

Inflation, that old troublemaker, isn’t gone yet. If rate cuts happen too quickly, combined with tariff policies, inflation could become sticky—market expectations for core PCE could stay around 2.5%. This would directly block the Fed from continuing its easing stance.

The unemployment rate has risen to 4.6%. The Fed’s rate cuts were initially aimed at stabilizing employment, but if the economy shows no clear signs of improvement, it could instead trigger recession fears, causing market sentiment to turn sharply negative. This uncertainty will bring volatility.

Another political factor cannot be ignored: Powell’s term ends in May 2026. Who the new chair will be and whether they will lean more towards easing are all variables. The Fed’s independence is under test.

**How should investors view this**

The tone of rate cuts in 2026 should be moderate and accommodative, with a total of about 50-75 basis points. This pace favors risk assets (stocks, crypto) but won’t send them soaring. The key remains monitoring employment and inflation data, as policy direction largely depends on these two indicators.

Opportunities in crypto assets depend on liquidity expectations, but the risks are clear—policy reversals always loom. Market risk appetite is high, so caution is advised.