FOMC Minutes Signal Fed Still In Support Of More Rate Cuts If Inflation Cools

The FOMC minutes have shown that the Fed still supports more rate cuts if inflation trends downwards to their 2% inflation target. However, some Fed officials indicated that they might support a rate hike if inflation rises or continues to remain well above their target. This is significant as such either decision in the future could impact Bitcoin and the broader crypto market.

FOMC Minutes Show Divided But Rate Cuts Still On The Table

According to the January FOMC minutes, several participants stated that further rate cuts would likely be appropriate if inflation were to decline in line with their expectations. Furthermore, some participants opined that it would likely be appropriate to hold the policy rate steady for some time as the Committee carefully assesses incoming data.

A number of these participants also judged that more rate cuts may not be warranted until there is a clear indication that the progress of disinflation is back on track. As CoinGape reported, the Fed held interest rates steady at the January FOMC meeting after making three cuts last year. The FOMC minutes showed that almost all participants supported this decision as they determined that inflation remains somewhat elevated while the economy has been expanding at a solid pace.

Meanwhile, there is now the possibility of the Fed hiking rates. According to the minutes, several participants indicated that they would have supported a two-sided description of the Committee’s future interest rate decisions. This means that a rate hike may be appropriate if inflation remains at above-target levels.

It is worth noting that prior to the FOMC minutes release, the January CPI inflation data came in at 2.4%, suggesting that inflation may be cooling. This marked a positive with Bitcoin rallying to as high as $70,000 over the weekend. Attention will now turn to the PCE inflation, the Fed’s favorite inflation gauge, which drops this Friday.

Bitcoin Falls Below $66,000

Bitcoin fell below the psychological $66,000 level on the back of the FOMC minutes release. TradingView data shows that the BTC price is currently trading just above this level at the time of writing, down 2% on the day. The Fed remains divided on rate cuts, which is creating uncertainty as to when they may lower interest rates again following last year’s cuts.

Market expert Nick Timiraos indicated that most Fed officials are in support of the Fed holding rates steady for now based on the language in the Fed minutes. CME FedWatch data shows 90% chance that the Fed will likely hold rates steady at the March FOMC meeting as concerns over inflation still linger.

Fed Governor Michael Barr said yesterday that it would likely be appropriate to hold rates steady for some time amid inflation risks. Fed Presidents Lorie Logan and Beth Hammack, who are voting members on the FOMC, also echoed a similar sentiment last week.