The Federal Reserve's December FOMC meeting was certainly a highlight.

Let's start with interest rates. The Fed continued to cut rates by 25 basis points, totaling a 75 basis point reduction this year, marking the third consecutive cut. The target range is now between 3.50% and 3.75%. But the voting results are interesting—the decision passed 9 to 3, the highest dissent since six years ago. How did the opposition vote break down? One member favored a more aggressive approach, proposing a 50 basis point cut; the other two were more conservative, advocating to hold steady. Essentially, this disagreement boils down to whether to continue accommodating the softening employment data. Inflation, after all, hasn't fully stabilized...

By the way, the dot plot also clearly illustrates the situation. In 2026, they are only considering one more rate cut, and in 2027, perhaps another round. The pace of rate reductions has sharply slowed, approaching the neutral rate line.

Liquidity is also changing. Quantitative tightening (QT) ended on December 1st, with reserve levels reaching "ample" standards. Next, the Fed is trying a new approach—buying short-term government bonds starting in December, at about $40 billion per month. Officially not called QE, but the effect is essentially easing tightening pressures and slightly expanding liquidity.

Powell's tone is also quite important. He said that the interest rate is now close to the neutral level, and future decisions will depend heavily on economic data—typical "hawkish rate cuts" thinking, meaning they won't continue to cut aggressively forever.

What does this mean for the markets? In the short term, risk assets (stocks, precious metals) may get a breather. But don’t get too optimistic—the expectation of continued large-scale easing into 2026 is now locked in, and the dollar might remain strong.

Overall, the Fed has shifted from tightening to approaching a neutral stance, balancing between preventing continued employment decline and avoiding a rebound in inflation. This delicate balancing act will need to be watched carefully.