Federal Reserve officials speak out intensively: Delay in interest rate cuts has become a consensus, with employment becoming the new focus

The new Federal Reserve voting member, Powell, recently stated that there is no need to rush into another rate cut, reflecting the mainstream attitude within the Federal Reserve. More notably, she emphasized that the employment market is a greater concern than inflation, marking a subtle shift in the Fed’s policy focus. As the Fed meeting on January 27-28 approaches, market expectations for rate cuts are being readjusted.

Powell’s Policy Stance: Rate Cuts Need to Wait

As a newly appointed voting member in 2026, Powell’s remarks represent the mainstream view of the Fed. She supports the Fed’s past three rate cut decisions but remains cautious about the current policy pace.

Core Position

Powell believes that the current monetary policy is “somewhat tight,” with interest rates still high enough—slightly above the neutral level that neither stimulates nor restrains growth. This indicates her confidence in maintaining the current rate levels. She expressed satisfaction with the expectation that the Fed will keep rates steady at the upcoming meeting on January 27-28.

She anticipates that by the end of 2026, inflation will make meaningful progress toward the Fed’s 2% target. However, this progress does not necessarily mean an immediate rate cut is needed. In her view, completing the task of reducing inflation remains the top priority.

Conditions for Rate Cuts

Powell does not completely rule out the possibility of rate cuts but has set clear conditions. She indicated a tendency toward moderate rate cuts later in 2026, provided one of the following conditions is met:

• Inflation data confirms her expectations that price pressures are easing
• Evidence emerges that employment conditions are unexpectedly worsening

These conditions reflect her emphasis on data and her concern for the employment market.

Employment Becomes a Greater Concern Than Inflation

A key signal in Powell’s remarks is her concern about the employment market. According to reports from Fed spokesperson Nick Timiraos, Powell believes that while the labor market has been impacted, it has not collapsed, but this remains a greater concern than inflation.

This view aligns with the latest Beige Book from the Fed, which shows that eight of the twelve Federal Reserve districts experienced slight to moderate economic growth, but employment conditions mostly remained unchanged. This indicates some signs of weakness in the employment market.

Fed Officials’ Attitudes Compared

Powell’s stance is not isolated but reflects a consensus within the Fed. However, different officials emphasize different aspects of policy.

This comparison shows that while Fed officials largely agree on holding rates in January, their outlooks for subsequent policy differ. Powell and Kashkari are more cautious, whereas Mester is seeking new reasons to justify rate cuts.

Market Implications

Powell’s statements carry several implications for the markets:

Adjustment of Rate Cut Expectations

Market expectations for rate cuts in 2026 have been changing. Powell’s remarks further confirm that the Fed is unlikely to cut rates in the near term. This makes a rate hold at the January 27-28 meeting highly probable.

Impact on the US Dollar and Interest Rate Markets

Delayed rate cuts typically support a stronger dollar and keep US Treasury yields high. This could exert pressure on equities and risk assets. Conversely, commodities and cryptocurrencies priced in USD may face some headwinds.

Considerations for the Crypto Market

A delay in rate cuts means liquidity conditions are unlikely to improve significantly in the short term. Based on related information, the market has already been digesting this expectation—Bitcoin, although breaking above $97,000, is more a reaction to technical factors and market sentiment rather than an actual improvement in liquidity.

Summary

Powell represents the mainstream view of the Fed: rate cuts can wait, and employment issues are more pressing. This implies:

• The probability of maintaining rates at the January 27-28 meeting is nearly 100%
• Rate cuts in 2026 will not be as frequent as the market previously expected
• Employment data will be a key variable influencing Fed policy
• Only if employment unexpectedly worsens or inflation data clearly improves might rate cuts be triggered

For the crypto market, this means liquidity conditions are unlikely to improve markedly in the short term. However, in the long run, if employment truly deteriorates, the Fed may be forced to cut rates. Therefore, the key is to monitor future employment and inflation data rather than the optimistic statements from Fed officials.