The Federal Reserve is grappling with a policy dilemma as it enters 2026 with a new chair and an uncertain interest rate trajectory. Despite implementing three rate cuts in 2025, the Fed remains divided. Some officials express concerns over persistent inflation, while others advocate for further easing measures. The situation is further complicated by political influences, notably Trump's threats to replace Powell, which have sparked debates over the central bank's independence. Economic uncertainties, including potential government shutdowns, add to the complexity. Meanwhile, Bitcoin's role as an inflation hedge keeps liquidity and crypto markets highly responsive to Fed policy signals.