The Market Truth Behind the Fed's Heavy Speech: Why Are Interest Rate Policies Still "Holding Steady at High Levels"?

Recently, two key figures from the Federal Reserve have made consecutive statements, sending a clear signal — don’t expect to see interest rates decline in the near future. Former Treasury Secretary Paulson bluntly stated that the current interest rate level is already slightly above the neutral position, equivalent to applying brakes to the economy. Current official Smith’s wording is even more straightforward: interest rates must remain at a level sufficient to continuously suppress economic activity in order to truly curb inflation.

Three key data points deserve close attention:

**Inflation Remains the Top Threat** — Although it has eased somewhat, pressure persists. Smith warned that prematurely cutting rates could instead trigger a stubborn inflation problem, and market doubts about whether the Fed can maintain the 2% inflation target are intensifying.

**The Job Market Needs to "Cool Down"** — This is a bold view from Smith: to prevent inflation from reigniting, a moderate correction in the labor market is even necessary. He explicitly stated that continuing rate cuts are unlikely to encourage companies to ramp up hiring.

**Economic Slowdown Has Deep-Rooted Causes** — Smith attributes the current sluggish growth mainly to structural factors rather than simple cyclical downturns. This suggests that the Fed’s policy tools are more effective against cyclical recessions and have limited impact on structural issues.

**The Core Logic Is Actually Quite Harsh**: The Fed has chosen a route of "short-term pain for long-term stability." They are willing to endure slower growth and mild adjustments in the job market rather than risk inflation spiraling out of control again. In the short term, not only is rate cuts unlikely, but policies may tighten further. This directly impacts the liquidity environment for crypto assets — under high interest rate conditions, the attractiveness of risk assets is relatively pressured.