The Federal Reserve kicks off the year with "heated debates"! Will there be a rate cut of over 100 basis points? Divergences are now front and center.

At the start of the year, the Fed revealed significant disagreements! Governor Milan openly stated that this year’s rate cut should exceed 100 basis points, while hawks insist that any cut must wait until the second half of the year.

Currently, the federal funds rate is stuck in the 3.5%-3.75% range, becoming a "thorn in the side" of the market. Milan’s stance is clear: the current policy clearly suppresses economic vitality, and only a substantial rate cut can unleash growth potential. This aggressive position contrasts sharply with most officials’ cautious stance—December’s dot plot shows a consensus expectation of only a 25 basis point cut for the year.

The divergence has already surfaced:

- Voting member Kashkari believes rates are near neutral and that further action should depend on inflation and employment data.
- Philadelphia Fed President Patrick Harker has drawn a red line, emphasizing that rate cuts must meet multiple conditions, including cooling inflation and stabilizing employment.

The market is also conflicted: CME data shows an 85.1% probability of holding rates steady in January, but the 64% surge in 2025’s gold prices has kept investors hopeful for easing policies.

The core of this debate is a balancing act between economic resilience and downside risks. On one side, the U.S. economy is resisting pressure beyond expectations; on the other, concerns grow over unemployment rising to 4.6% and weakening manufacturing PMI. Ultimately, the policy direction will depend on inflation data and variables brought by changes in Federal Reserve personnel.

Global assets are standing at a crossroads, with every official statement potentially triggering a chain reaction. Future developments are worth closely monitoring.