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Minutes from the Federal Reserve’s January meeting, released Wednesday, revealed a surprising shift toward dealmaking among policymakers, with several officials publicly discussing the possibility of raising interest rates if inflation remains stubbornly high.
Bitcoin posted a sharp decline in response, falling below $66,500 during Asian trading hours.
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Fed officials are divided but leaning toward hawks
The US Federal Open Market Committee (FOMC) voted 10 to 2 at its meeting on… January 27-28 To keep the federal funds rate steady at 3.5%-3.75%, after three successive cuts totaling 75 basis points between September and December 2025.
The two Conservatives Christopher Waller and…Stephen MearnBoth members of the opposition expressed their preference for a reduction of a quarter point, considering that the labor market is still weak without further monetary support.
However, the extended committee adopted a remarkably cautious tone. Several participants warned that further monetary easing in the face of high inflation could signal weak adherence to the 2% target. A larger group favored keeping prices steady, as they wanted “a clear signal that the rate of falling inflation is really back on track” before making further cuts.
Interestingly, many officials wanted the post-meeting statement to reflect the possibility of “upward adjustments” to the federal funds rate. This represents a direct signal of the possibility of raising interest rates.
“Most participants warned that progress towards the committee’s 2% target may be slower and more volatile than generally expected,” the minutes say.
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Powell’s exit and Rush’s arrival add to the uncertainty
The trend toward hawkishness sets the stage for a potential clash with incoming Fed leadership. Reserve Chairman Jerome Powell’s term ends in May, and President Donald Trump has nominated former governor Kevin Worsh to succeed him.
Trump said repeatedly The need to lower interest ratesThe White House confirmed on Wednesday that recent data showed that inflation was “fresh and stable”. However, the Federal Reserve’s preferred measure for measuring inflation is the Personal Consumer Price Index (PCE). PCE is expected to accelerate again in the coming months, and this could complicate the timeline for any future interest rate cuts.
Futures traders are currently betting that the next cut won’t happen before June, with another cut likely in September or October.
Bitcoin declines due to negative tone and geopolitical risks
The cryptocurrency market saw a quick reaction. Bitcoin began to fall immediately after the release of the minutes during evening trading in the United States. It fell from around $68,300 to below $66,500 in Asian morning hours. This represents a drop of 1.6% in 24 hours. The pace of selling intensified with rising tensions between the United States and Iran, which pushed oil prices up more than 4%, thus weakening risk appetite.
Coinbase CEO Brian Armstrong sought to reassure markets, noting that the recent decline appears to be driven more by psychological factors than market fundamentals. He stated that the exchange is buying shares and accumulating Bitcoin at low prices.
Market data showed trading volume and value rising as Asian markets returned from the Lunar New Year holidays, increasing selling pressure in light of growing macro-level uncertainty.
With the Federal Reserve signaling a longer pause and geopolitical risks escalating, cryptocurrency markets face a difficult path – at least until clearer signals emerge about inflation and the direction of interest rate policy.
