End-of-year, the Federal Reserve has cut interest rates as expected, lowering the federal funds rate target range to 3.50%-3.75%. This marks the third rate cut in 2025. But if you still hope that rate cuts will drive the market? You might need to adjust your expectations.

The latest dot plot released by the Federal Reserve in December reveals some clues — the median interest rate forecast by the end of next year is 3.4%, which means there may only be one 25 basis point rate cut in 2026. More straightforwardly, market estimates suggest that the probability of a cumulative 25 basis point rate cut by March next year is only about 40.7%. The rate cut train has already started to accelerate.

Why is it so difficult to continue cutting rates? The issue is actually quite complex. First, internal disagreements within the Federal Reserve have intensified, with even the first dissenting vote since 2019 occurring at the December meeting. Some believe rate cuts are not fast enough, while others, concerned about inflation, advocate for holding steady. Second, although inflation has eased, it is still expected that the PCE inflation rate in 2026 will remain at 2.4%, still above the Fed’s 2% target. Lastly, there is an important variable not to ignore — Powell’s term will end in May 2026, and leadership changes often cast new shadows over monetary policy.

What does this series of signals mean for investors? In an era where the certainty of rate cuts is decreasing and policy uncertainty is rising, the allocation logic for risk assets like Bitcoin also needs to be reconsidered.