The Federal Reserve (Fed) will announce its latest interest rate decision on December 19 at midnight, with the market widely expecting another rate cut of 0.25 percentage points, reducing the effective rate from 4.7% to 4.4%. However, what truly draws attention is not the rate cut itself, but the Fed's forward guidance on the interest rate path for 2025. Although the legislative body vaguely promised a 100 basis point rate cut next year in September, Wall Street's expectations have become more conservative, with some traders even predicting only a 50 basis point cut next year.

However, some economists hold a more optimistic or neutral view. Recent US economic data has been strong, with GDP for the third and fourth quarters revised up to 2.8% and 3.3%, respectively, far exceeding the earlier CBO estimate of a ‘sustainable growth’ level of 2%. At the same time, while inflation is declining, it remains stubbornly high, with the CPI still hovering between 3% and 4%, above the official target of 2%. This situation of ‘strong economy, inflation cooling less than expected’ leads some to believe that the Fed may hesitate to ease policy too quickly next year.

The pace of interest rate cuts is tight, and volatility might worsen.

From the market perspective, Wall Street's conservative adjustments coincide with the increased difficulty of the Fed's decision-making. High interest rates and insufficiently moderate inflation suggest that if the Fed hastily implements significant rate cuts next year, it might encourage excessively loose funding conditions and once again heighten inflationary pressures. The Fed may slightly adjust the 2025 interest rate path target upwards (for example, from the previously expected 3.4% to 3.7%), positioned between Wall Street's current expectation of 3.9% and the Fed's previously promised median value.

What does this mean for the market? If interest rates are higher than expected but still gradually declining, the overall cost of capital will continue to decrease, benefiting borrowing and leverage operations, which will attract more funding into risk assets (including Stocks and Cryptos), pushing up their prices.

Since the scale of the rate cut may not meet the optimistic expectations, it could also lead to market adjustments or fluctuations in the short term. The market also needs to assess whether the Fed's more cautious rate cut expectations are sufficient to strongly boost risk appetite, prompting investors to reconsider their asset allocation strategies.

The new regulatory environment and policy shifts will dominate future market trends.

Another key factor influencing the interest rate cut path in 2025 is the US policy environment. If Trump leans towards relaxed financial regulation and encourages capital investment, the crypto market may welcome a more favorable regulatory ecosystem. New policies such as tax cuts, tariffs, and immigration controls could all push inflation up, making the Fed hesitant to cut rates too aggressively. However, if policies maintain steady economic growth rather than ‘emergency rate cuts’, this could actually be a healthy sign for long-term investors, indicating strong economic resilience and greater stability in financial markets.

On the other hand, Bitcoin recently reached a new high of $108,367, as the market anticipates that a loose monetary environment will continue to bolster risk assets. Investors expecting significant rate cuts to boost market sentiment may need to rationally assess the situation: the Fed may only provide slightly lower than expected signals of easing, and if trading psychology falls short, prices could experience a temporary correction.

Stable reductions replace aggressive rate cuts.

In summary, after the Federal Reserve's December interest rate decision, the public's view on the extent of rate cuts in 2025 is likely to become more 'neutral': it’s not that there won't be cuts, but rather that they will be gradual. Although inflation is trending down toward the target, it remains 'stubborn'; while the economy is still strong, the Fed is cautious about overly aggressive stimulation. The Fed will adjust its pace based on actual data and policy variables, rather than trading short-term gratification for a 'one-time significant cut.'

For the market, this signals composure and pragmatism. Overly optimistic expectations for rate cuts need adjustment, but at least a moderate monetary environment can still be anticipated, providing long-term mild support for Stocks, Bonds, and even the crypto market.

In a complex interplay where economic performance exceeds expectations, inflation is down but not enough, and the regulatory environment needs clarification, the pace and extent of rate cuts in 2025 will remain key factors influencing market direction. It is necessary to manage risks well and make timely adjustments to investment strategies to cope with subtle changes that 'flexible rate cuts' by the Fed may bring.