Recently, the actions of the Federal Reserve can be described as a "full disclosure." It's not a secretive rate cut, but an outright announcement: rate cuts + balance sheet expansion, both happening simultaneously.

Let's first look at the decision from this FOMC meeting. On December 10th, the Fed cut interest rates by 25 basis points, bringing the federal funds rate to the 3.5%-3.75% range. This is the third rate cut this year, totaling 175 basis points since September, a significant move. But the issue is—the voting results were 9:3 in favor, with more dissenters than usual, marking the most divided vote since 2019. Some (Goolsbee, Schmidt) outright advocated no cut, while others (Milan) felt 25 basis points was insufficient and called for a 50 basis point cut.

Why such disagreement? It all boils down to the old dilemma: Will inflation rebound? Will unemployment continue to worsen? Plus, with the government shutdown during this period, data is incomplete, and each committee member's judgment naturally varies.

But this disagreement doesn't change the overall direction. In the subsequent guidance, the Fed clearly stated that rate hikes will slow next year. The dot plot signals that by 2026, there might be small rate cuts each year. That said, looking at the Reserve Management Purchase (RMP) program launched on December 12th reveals their true intentions.

An initial investment of $40 billion in short-term government bonds, maintained until April next year, then possibly reduced to $20-25 billion per month. This sounds like QE, but the Fed explicitly emphasized that this is purely a technical operation—simply to ensure the banking system has enough reserves and to prevent stress in the overnight markets. In other words, the QT (balance sheet reduction) era is over, and liquidity is shifting from tightening to easing.

What does this signal to the market? Growth stocks, gold, cryptocurrencies—risk assets and inflation hedges—should all benefit. The dollar may come under pressure, and liquidity conditions in emerging markets will improve. Rate cuts are part of it, but the real driver is this liquidity shift—rate cuts and balance sheet expansion resonating together, and the trend is now set.