[color=var(--md-box-body-color,var(--md-box-global-text-color))]On December 10, the Federal Reserve announced a 25-basis-point cut in its benchmark interest rate, bringing it to a target range of 3.5% to 3.75%. This marked the third rate cut within the year, with the cumulative reduction reaching 75 basis points. While the decision appeared to align with market expectations, it was in fact a difficult balancing act for the Fed amid multiple pressures: sticky inflation, mounting employment headwinds, and political interference. Its implications have long transcended U.S. borders, emerging as a core variable reshaping the global asset allocation landscape.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]The immediate driver behind this rate cut stemmed from underlying concerns over the U.S. economic fundamentals. In its post-meeting statement, the Federal Open Market Committee (FOMC) explicitly noted that although the U.S. economy maintained moderate expansion, job growth had slowed markedly. The unemployment rate edged up from 4.1% in June to 4.2% in September, with downside risks to the labor market continuing to accumulate.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]Household consumption, the core engine of economic growth, also showed signs of weakness. Coupled with the lack of official employment and inflation data caused by the earlier U.S. government shutdown, the Federal Reserve had to adopt precautionary easing measures to stabilize market confidence amid incomplete information. Notably, the inflation issue has yet to be fundamentally resolved. Despite fluctuations since the start of the year, the current inflation rate remains significantly above the Fed’s long-term 2% target. This contradiction between cooling employment and persistently high inflation has made the rate-cut decision highly controversial.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]The complexity of the decision is further reflected in the deep divisions within the Federal Reserve. Of the 12 voting members in this meeting, only 9 supported the 25-basis-point cut. One member advocated for a more aggressive 50-basis-point reduction, while another two insisted on keeping interest rates unchanged.
[color=var(--md-box-body-color,var(--md-box-global-text-color))] This marked the first time since 2019 that such a large number of dissenting votes were cast. Behind these divisions lies a clash of policy logics:

• The mainstream faction argued that a moderate rate cut is sufficient to address employment risks while preserving policy flexibility.
• The hawkish faction warned that the employment situation is more severe than the data suggests, necessitating stronger easing measures.
• The cautious faction cautioned that overly rapid rate cuts could prolong the inflation cycle or trigger asset bubbles.
• 
  

[color=var(--md-box-body-color,var(--md-box-global-text-color))]These internal rifts not only mirror the complexity of the current economic landscape but also undermine the transmission efficiency of monetary policy.

[color=var(--md-box-body-color,var(--md-box-global-text-color))]Even more challenging is the challenge to the Fed’s independence posed by political interference. Since taking office again in January this year, U.S. President Donald Trump has repeatedly criticized the Fed for cutting rates too slowly, even threatening to dismiss Chairman Jerome Powell. Following this latest rate cut, he still expressed dissatisfaction, stating that “the cut could have been larger.” His key advisor, Larry Kudlow, Director of the National Economic Council, also publicly claimed that “the Fed has ample room for further rate cuts and may need to ease monetary policy more.” Against the backdrop of the upcoming decision on the next Fed Chair, the tug-of-war between political pressure and policy independence has intensified, undoubtedly fueling market uncertainty about the future direction of monetary policy.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]As the hub of global core monetary policy, the Fed’s rate-cut decisions have already triggered ripple effects worldwide. In the asset market, lower U.S. dollar funding costs have driven the reallocation of global capital, sparking a wave of capital inflows into emerging markets. The U.S. Treasury yield curve has taken on a saddle-shaped pattern characterized by “short-term declines and long-term stability.” The yield on the 10-year U.S. Treasury note has rebounded amid economic resilience and sticky inflation, reflecting market expectations of a slower pace of future rate cuts. As a non-interest-bearing asset, gold has performed strongly under the combined influence of falling real interest rates and rising safe-haven demand, with its price climbing significantly in recent periods.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]Yet the effects of the rate cuts are not immediate; instead, they face multiple constraints. On one hand, monetary policy has a clear lag effect and cannot quickly reverse the economic slowdown in the short term. On the other hand, external factors such as slowing global economic growth and geopolitical risks will also dilute the effectiveness of the easing policies. Some analysts pointed out that the pace of the Fed’s rate cuts has become an important reference for global investment, but investors must remain vigilant against risks such as policy miscalculations or an unexpected economic downturn. For emerging economies, while capital inflows bring opportunities, countries with weak economic fundamentals and high external debt still struggle to break free from their predicaments, further exacerbating the divergence in the global economic landscape.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]Overall, the Federal Reserve’s three rate cuts this year are both a reactive response to domestic economic pressures and a reluctant move amid a complex internal and external environment. The future direction of monetary policy will depend not only on the interplay between inflation and employment data but also on multiple factors, including the building of internal consensus, the degree of political interference, and the global economic situation. For the global market, understanding the Fed’s policy logic and dilemmas, and seizing structural opportunities in asset repricing, will be core tasks in the coming period. Whether the Federal Reserve can uphold the independence of monetary policy and strike a balance between stabilizing the domestic economy and safeguarding global financial stability will not only bear on the prospects of the U.S. economy but also profoundly shape the trajectory of the global economic landscape.

[color=var(--md-box-body-color,var(--md-box-global-text-color))]On December 10, the Federal Reserve announced a 25-basis-point cut in its benchmark interest rate, bringing it to a target range of 3.5% to 3.75%. This marked the third rate cut within the year, with the cumulative reduction reaching 75 basis points. While the decision appeared to align with market expectations, it was in fact a difficult balancing act for the Fed amid multiple pressures: sticky inflation, mounting employment headwinds, and political interference. Its implications have long transcended U.S. borders, emerging as a core variable reshaping the global asset allocation landscape.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]The immediate driver behind this rate cut stemmed from underlying concerns over the U.S. economic fundamentals. In its post-meeting statement, the Federal Open Market Committee (FOMC) explicitly noted that although the U.S. economy maintained moderate expansion, job growth had slowed markedly. The unemployment rate edged up from 4.1% in June to 4.2% in September, with downside risks to the labor market continuing to accumulate.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]Household consumption, the core engine of economic growth, also showed signs of weakness. Coupled with the lack of official employment and inflation data caused by the earlier U.S. government shutdown, the Federal Reserve had to adopt precautionary easing measures to stabilize market confidence amid incomplete information. Notably, the inflation issue has yet to be fundamentally resolved. Despite fluctuations since the start of the year, the current inflation rate remains significantly above the Fed’s long-term 2% target. This contradiction between cooling employment and persistently high inflation has made the rate-cut decision highly controversial.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]The complexity of the decision is further reflected in the deep divisions within the Federal Reserve. Of the 12 voting members in this meeting, only 9 supported the 25-basis-point cut. One member advocated for a more aggressive 50-basis-point reduction, while another two insisted on keeping interest rates unchanged.
[color=var(--md-box-body-color,var(--md-box-global-text-color))] This marked the first time since 2019 that such a large number of dissenting votes were cast. Behind these divisions lies a clash of policy logics:

• The mainstream faction argued that a moderate rate cut is sufficient to address employment risks while preserving policy flexibility.
• The hawkish faction warned that the employment situation is more severe than the data suggests, necessitating stronger easing measures.
• The cautious faction cautioned that overly rapid rate cuts could prolong the inflation cycle or trigger asset bubbles.
• 
  

[color=var(--md-box-body-color,var(--md-box-global-text-color))]These internal rifts not only mirror the complexity of the current economic landscape but also undermine the transmission efficiency of monetary policy.

[color=var(--md-box-body-color,var(--md-box-global-text-color))]Even more challenging is the challenge to the Fed’s independence posed by political interference. Since taking office again in January this year, U.S. President Donald Trump has repeatedly criticized the Fed for cutting rates too slowly, even threatening to dismiss Chairman Jerome Powell. Following this latest rate cut, he still expressed dissatisfaction, stating that “the cut could have been larger.” His key advisor, Larry Kudlow, Director of the National Economic Council, also publicly claimed that “the Fed has ample room for further rate cuts and may need to ease monetary policy more.” Against the backdrop of the upcoming decision on the next Fed Chair, the tug-of-war between political pressure and policy independence has intensified, undoubtedly fueling market uncertainty about the future direction of monetary policy.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]As the hub of global core monetary policy, the Fed’s rate-cut decisions have already triggered ripple effects worldwide. In the asset market, lower U.S. dollar funding costs have driven the reallocation of global capital, sparking a wave of capital inflows into emerging markets. The U.S. Treasury yield curve has taken on a saddle-shaped pattern characterized by “short-term declines and long-term stability.” The yield on the 10-year U.S. Treasury note has rebounded amid economic resilience and sticky inflation, reflecting market expectations of a slower pace of future rate cuts. As a non-interest-bearing asset, gold has performed strongly under the combined influence of falling real interest rates and rising safe-haven demand, with its price climbing significantly in recent periods.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]Yet the effects of the rate cuts are not immediate; instead, they face multiple constraints. On one hand, monetary policy has a clear lag effect and cannot quickly reverse the economic slowdown in the short term. On the other hand, external factors such as slowing global economic growth and geopolitical risks will also dilute the effectiveness of the easing policies. Some analysts pointed out that the pace of the Fed’s rate cuts has become an important reference for global investment, but investors must remain vigilant against risks such as policy miscalculations or an unexpected economic downturn. For emerging economies, while capital inflows bring opportunities, countries with weak economic fundamentals and high external debt still struggle to break free from their predicaments, further exacerbating the divergence in the global economic landscape.


[color=var(--md-box-body-color,var(--md-box-global-text-color))]Overall, the Federal Reserve’s three rate cuts this year are both a reactive response to domestic economic pressures and a reluctant move amid a complex internal and external environment. The future direction of monetary policy will depend not only on the interplay between inflation and employment data but also on multiple factors, including the building of internal consensus, the degree of political interference, and the global economic situation. For the global market, understanding the Fed’s policy logic and dilemmas, and seizing structural opportunities in asset repricing, will be core tasks in the coming period. Whether the Federal Reserve can uphold the independence of monetary policy and strike a balance between stabilizing the domestic economy and safeguarding global financial stability will not only bear on the prospects of the U.S. economy but also profoundly shape the trajectory of the global economic landscape.