Inflation will persist for another year, Federal Reserve officials collectively turn hawkish, and interest rate cut expectations are significantly adjusted

Bostic recently stated that inflationary pressures are expected to persist until 2026. This brief statement appears simple but reflects the Fed’s true assessment of the current inflation situation and also signals that market fantasies about rate cuts need to be thoroughly shattered. Combined with recent collective statements from Federal Reserve officials, we can see a clear signal: rate cuts are unlikely in the short term, and the start of a rate-cut cycle will be significantly delayed.

Why Will Inflation Persist for So Long?

According to the latest data, in December 2025, the US core CPI increased by 2.6% year-over-year, and the overall CPI reached 2.7%, both above the Fed’s 2% inflation target. This is not a small gap.

Bostic emphasized in his statement that “there is still a long way to go to reach the 2% inflation target, and policy must remain restrictive.” This means:

• Current inflation levels still need to further decline
• Economic resilience remains strong, with no urgent need for rate cuts
• The Fed will not compromise prematurely due to market pressure

In contrast, Fed Governor Mester believes inflation is returning along the right track and hints that a 1.5 percentage point rate cut may be needed within the year. However, this view is currently in the minority; most officials’ consensus remains more hawkish.

Policy Tone Behind Officials’ Collective Statements

This round of Fed officials’ remarks are not just about inflation and rate cuts but also serve to clearly assert policy independence.

Several officials have explicitly indicated that the January FOMC meeting is very likely to keep rates steady. This is a clear “no rate cut” signal for the market.

Realignment of Rate Cut Expectations

The market’s rate cut fantasies over the past year looked like this: in 2025, the Fed cut rates three times consecutively, totaling 75 basis points, leading Wall Street institutions to collectively declare that the “rate cut cycle will begin in 2026.” But now, this expectation needs a major adjustment.

The Market’s Common New Consensus

• January meeting: keep rates unchanged
• Earliest rate cut: after June
• Total rate cuts for the year: possibly much less than expected

What does this adjustment mean? It indicates that the high-interest-rate environment will last longer than the market anticipated. For risk assets, this is a bad news that needs to be digested.

Impact on the Crypto Market

In the short term, this will put pressure on Bitcoin and mainstream cryptocurrencies. Under high interest rates, traditional financial assets become more attractive, and incremental capital flowing into cryptocurrencies will be suppressed.

But from a longer cycle perspective, this may not be entirely bad:

• The Fed’s insistence on independence reduces the risk of policy being hijacked
• The economy remains resilient, indicating no underlying collapse risk
• If inflation truly falls back close to 2% in the second half of the year, the door to rate cuts will open, potentially triggering a wave of capital inflows

Key Future Time Points

Based on officials’ statements and market expectations, the following dates are worth watching:

• Late January FOMC meeting: confirm rates remain unchanged
• March-May: observe whether inflation continues to decline
• June FOMC meeting: may become the first window for rate cuts
• Second half of the year: if inflation keeps falling, a new rate-cut cycle could begin

Summary

Bostic’s statement confirms a reality: inflationary pressures will indeed persist until the end of 2026, and the Fed will not change its restrictive policy stance in the near term. The market needs to abandon fantasies of rate cuts in January or even Q1 and shift focus to after June.

For the crypto market, this means adapting to a high-interest-rate environment in the short term, but also that once the rate-cut cycle truly begins, a strong upward rally could follow. The key is patience and not being scared out of the market by short-term policy signals.