Federal Reserve's Powell is supported, rate cuts are slow but inevitable: Why is the market celebrating?

Federal Reserve Philadelphia President Patrick Harker, after experiencing the turbulence of the Department of Justice’s investigation into his boss Powell, not only publicly voiced support for Powell but also made new statements regarding the timing of rate cuts. Following these signals, the market responded immediately, with Bitcoin surging to $97,000 and Ethereum breaking through $3400. What underlying policy logic is hidden behind the seemingly contradictory “rate cuts can wait” and “support Powell” messages?

Harker’s True Stance: Dovish Expectations Under Hawkish Packaging

According to the latest news, Harker stated that the current monetary policy is “somewhat tight” and holds a cautiously optimistic attitude towards inflation returning to the 2% target. More importantly, he believes that a small rate cut later this year might be appropriate.

This statement appears moderate but contains a lot of information. As a voting member of the FOMC in 2026, Harker’s remarks directly influence the Fed’s decision on January 30-31. He did not say “no rate cut,” but clarified the timing—“later this year”—which means that the question has shifted from “whether” to cut rates, to “when.”

Breaking News Emphasizes the True Meaning of “Rate Cuts Can Wait”

The headline emphasizing “rate cuts can wait” can be easily interpreted as hawkish. However, combined with Harker’s specific remarks, the “wait” here does not mean “no cut,” but “not in a hurry.” He emphasizes the need to “remain patient and keep rates stable for a longer period,” which is paving the way for a rate cut at the end of the year—first demonstrating that inflation is indeed falling back, then shifting policy.

This is a typical Fed communication strategy: using moderate language to prepare for more aggressive policy changes.

Political Support at a High Level

More noteworthy is Harker’s support for Powell. According to related information, the Department of Justice’s investigation into Powell has intensified tensions, but then former Fed Chairs Greenspan, Yellen, Bernanke, and four former U.S. Treasury Secretaries (Gates, Lew, Paulson, Rubin), including Harker, unusually united to strongly condemn the DOJ’s investigation.

As a former Treasury Secretary, Harker’s support is not only a policy endorsement but also a political stance. This collective voice from former officials usually indicates that the stability of current policies is assured.

Why the Market Celebrates: Rate Cut Expectations vs. Policy Uncertainty

Market reactions to Harker’s speech are very direct:

This isn’t because the market was surprised by the rate cut expectation—such expectations have existed for a while. The real driving force comes from two aspects:

Reinforcement of Certainty

Harker’s remarks turn “rate cuts possible by the end of the year” into “rate cuts very likely by the end of the year.” Moving from vague expectations to a relatively clear policy direction is a clear positive for risk assets. The crypto market is especially sensitive to policy certainty because it directly affects liquidity expectations.

Elimination of Political Risks

Although the Powell investigation turbulence has not completely subsided, the collective support from former officials has already reassured the market. Once Powell’s position stabilizes, the coherence of Fed policies is guaranteed, which is crucial for long-term investors.

The True Implication for the Crypto Market

The logic behind this rally is straightforward:

1. Confirmed rate cut expectations—rate cuts will increase liquidity, and the crypto market is particularly sensitive to liquidity.
2. Enhanced policy stability—Powell’s stabilized position means no drastic fluctuations in Fed policy.
3. Rising risk appetite—greater policy certainty increases the attractiveness of risk assets.

However, it should be noted that these are based on the expectation of “later” rate cuts. If inflation data repeatedly disappoints or if tariffs introduced by the Trump administration create new uncertainties, the timing of rate cuts may be delayed again.

Summary

Harker’s statements seem contradictory—saying “rate cuts can wait” yet supporting Powell—but in reality, he is using moderate language to confirm the inevitability of rate cuts. As a voting member of the 2026 FOMC, his remarks essentially lock in the possibility of a rate cut before the end of the year. The market’s response is also rational: driven by increased policy certainty and the elimination of political risks, risk assets have entered a new rally.

The key now depends on subsequent economic data, especially inflation and employment figures, whether they can support this rate cut expectation. If the data do not cooperate, even with Harker’s support, the timing of rate cuts may be postponed again.