Federal Reserve Board Member Milan's interest rate cut declaration: Policy disagreements and market risks under political intervention

Federal Reserve Governor Milan recently publicly called for the Fed to cut interest rates by more than 100 basis points this year, a statement that has once again intensified the already severe policy divisions within the Federal Reserve. Under political pressure from the Trump administration, the Fed’s independence is being compromised, and market sensitivity to this policy uncertainty has spread from the stock market to crypto assets. In December last year, just due to high-level “public disputes” within the Fed, Bitcoin plummeted from $92,000 to $80,600 within 24 hours, triggering $19.2 billion in forced liquidations across the internet.

Central Bank Divisions Under Political Intervention

Milan’s position as a “rate-cutting radical” is not primarily based on economic data itself. According to relevant analysis, the Trump administration specifically promoted Milan to the Federal Reserve Board in September last year, aiming to install “their own people” within the Fed to push forward the rate-cutting agenda. This nepotistic approach has broken the long-standing policy independence of the Federal Reserve.

Internal policy disagreements within the Fed have become intense:

• The radical faction represented by Milan advocates for significant rate cuts to stimulate employment and manufacturing
• New York Fed President Williams attempts to “put out fires,” emphasizing that current monetary policy is in an ideal position
• Boston Fed President Collins openly states that the rate cut decision-making process is “full of struggles”

This serious rift among top officials reflects the real dilemma faced by the Fed: rate cuts can temporarily support employment, but may exacerbate asset bubbles and debt risks; standing pat can curb inflation but might trigger a surge in unemployment.

Employment Pressure and Policy Paradox

What is the economic logic behind Milan’s call for large rate cuts? Unemployment is indeed rising. According to the latest data, the US unemployment rate has reached 4.6%, and behind this are structural issues: ongoing contraction in strategic industries such as manufacturing and information technology. In November, corporate layoffs totaled 153,000, a year-over-year increase of 175%.

But there is a deeper issue: the Fed’s decision-making mechanism is shifting from “data dependence” to “political pressure field.” The government shutdown caused official data for October and November to be missing, forcing the Fed to rely on private sector data like ADP’s “blind flight,” whose accuracy is itself questionable. In this state of information asymmetry, Milan’s proposal for a 100 basis point rate cut is essentially a political statement rather than a purely economic decision.

Market Already “Paying the Price” for Policy Uncertainty

Cryptocurrency markets are most sensitive to Fed policy disagreements. The December crash is a clear example: when Fed officials started “public disputes,” Bitcoin experienced a chain of liquidations at 3 a.m. (the intersection of the US trading day ending and the Asian trading day beginning). Many highly leveraged longs were forced to close positions after prices broke key support levels, further depressing prices and creating a vicious cycle.

What does this indicate? Market expectations of Fed policy have become extremely fragile. When internal consensus on policy direction disintegrates, investors cannot establish stable risk assessment frameworks and can only quickly close positions to avoid uncertainty.

Policy Outlook for 2026

According to relevant analysis, 2026 will be a critical year for the Fed. Several key dates to watch:

• January 15: MSCI rating of MicroStrategy
• May 15: Powell’s term as Fed Chair expires, and a new chair takes over (currently Hassett and Waller are competing; Hassett, as a dovish rate cutter, is currently leading)
• November 3, 2026: US midterm elections

The current December dot plot shows only one rate cut in 2026, but this clearly displeases the Trump administration. Data suggests that from January to April, rate cuts are unlikely, meaning expectations for rate cuts may be re-ignited after May, especially after the new Fed Chair takes office.

Summary

The 100 basis point rate cut advocated by Fed Governor Milan essentially reflects the policy split under political pressure. This division not only impacts the US economic outlook but also directly affects the pricing of global risk assets. The crypto market’s crash has already demonstrated that when central bank policies become uncertain, investors quickly adjust their risk exposure. In 2026, with the new Fed Chair taking office and midterm elections approaching, this policy uncertainty may intensify further. For market participants, the key is not to guess what the Fed will do, but to understand why the Fed cannot reach consensus.