The recent statement by Philadelphia Fed Chair Powell essentially sets the new rhythm for the global markets in 2026. Her message is very clear: inflation is no longer the top priority; the current focus is on whether the labor market will encounter problems.

In simple terms, the Federal Reserve's policy stance is shifting—moving from a strict focus on inflation to prioritizing employment.

**The signal is very clear**

Powell's attitude towards inflation can be described as "cautiously optimistic," believing that there is a high chance of inflation cooling down by 2026. She also mentioned that the current interest rate levels are already sufficient to control inflation. Based on this judgment, she indicated that if the economy develops as expected, a moderate rate cut before the end of the year would be reasonable. This opens a window for rate cuts in the market.

**Where is the problem?**

There is a lack of consensus within the Federal Reserve, which is uncommon in history. At the December meeting, three members voted against the policy. Regarding the interest rate trajectory in 2026, officials' forecasts vary greatly, with the median only implying one rate cut. Market pricing is also very chaotic: the likelihood of a rate cut in January is extremely low, and even the possibility of over 50% in March is uncertain.

**The crypto market situation**

Expectations of rate cuts are the most important macro drivers for crypto assets. How much the Fed cuts rates will determine whether retail funds will flow back in. Currently, market sentiment is extremely pessimistic, with a strong desire for liquidity shifts. But the problem is, this split stance and uncertain path of the Fed mean that liquidity improvements may come slower than expected, and the process could be more turbulent. Investors need to be psychologically prepared for swings between hope and disappointment.