Fed FOMC Preview: Dissent and Hawkish Tone Point to Slower Rate Cuts, Possible 2026 Pause
The Federal Reserve’s upcoming FOMC meeting is expected to carry a hawkish tone with notable dissent among voters, suggesting a slower path of rate cuts and a potential pause extending into 2026. Major banks — including Barclays, JPMorgan, BNY Mellon, Bank of America and Deutsche Bank — anticipate messaging that emphasises data-dependence, uncertainty about future moves, and a high hurdle for further cuts. JPMorgan predicts multiple votes against cuts while BNY Mellon highlights divergent policy stances. Powell is likely to signal caution. Market watchers also expect reserve management actions: some forecasts foresee the Fed beginning Treasury purchases of short-maturity securities around $45 billion per month from January, though Wells Fargo says a March start is more probable. Analysts note these developments could tighten the timeline for rate easing, affect liquidity conditions and influence crypto market sensitivity to macro signals. FedWatch probabilities cited elsewhere show heavy market attention on timing of cuts. Key points for traders: expect continued volatility around Fed communications; cautious, data-driven language that lowers the chance of near-term rate cuts; possible incremental liquidity expansion if Treasury purchases begin (timing uncertain), which would be supportive for risk assets; dissent among Fed officials could create policy uncertainty, increasing short-term market swings.
Neutral
The report points to a hawkish FOMC tone, dissent among voters, and cautious Powell messaging — all of which reduce the likelihood of rapid near-term rate cuts. Reduced probability of aggressive easing is typically negative for risk assets, including crypto, suggesting bearish pressure. However, the possibility of the Fed commencing short-maturity Treasury purchases (estimated around $45b/month) introduces potential liquidity support that could counteract some negative effects. The mixed signals — delayed cuts but possible liquidity operations — imply uncertainty rather than a clear directional shock. Historically, hawkish Fed language with uncertain liquidity moves (e.g., pause in cuts combined with liquidity operations) has produced choppy, volatility-driven trading rather than sustained sell-offs or rallies. Short-term: expect heightened volatility around FOMC statements and data releases, with downside bias if markets price out cuts. Long-term: if cuts are pushed into 2026 and liquidity remains constrained, crypto risk assets could face muted upside; conversely, confirmed Treasury purchases or resumed easing would be bullish. Traders should monitor Fed rhetoric, vote splits, and concrete timing of reserve purchases to gauge liquidity implications and adjust positioning accordingly.