U.S. Federal Reserve policymakers discussed the possibility of raising interest rates last month, according to newly released comments from their January meeting.
The minutes of the Federal Open Market Committee meeting at the end of January were as follows: released on Wednesday, revealing that some policymakers were considering raising interest rates due to persistently high inflation.
Several participants indicated they would support “the possibility that upward revisions to the target range for the federal funds rate might be appropriate if inflation remains above target levels,” the minutes said.
At their January meeting, central bank policymakers voted to keep interest rates unchanged at 3.5% to 3.75% after cutting rates three times in overdue 2025, from 4.5% to the current level.
If it goes into effect, it would be the first rate augment since July 2023. However, CME futures markets indicate the probability that rates will remain unchanged at the next Fed meeting on March 18 is 94%.
The Federal Reserve has two main responsibilities for its interest rate policy: inflation and the labor market.
Concerns about high inflation persist
The minutes also revealed that there is a significant hawkish contingent that is not yet ready to take on further cuts.
Some participants noted that it would probably be appropriate to “keep interest rates steady for a while” to give them more time to evaluate economic data.
However, many of these participants assessed that “additional policy easing may not be warranted until there are clear signs that disinflation progress is back on track.”
Related: Why Bitcoin has recently responded more to liquidity conditions than to interest rate cuts
Most participants warned that progress towards the 2% inflation target “may be slower and more uneven than generally expected”, assessing that there is a significant risk that the inflation target remains above target.
If inflation were to fall as expected, rate cuts “would probably be appropriate,” the minutes said.
Inflation in the US as measured by the Consumer Price Index (CPI) is currently 2.4%, after increasing by 0.2% in January, According to to the Bureau of Labor Statistics.
Interest rate increases are usually negative for cryptocurrency prices
Higher rates are generally bearish for high-risk assets like cryptocurrencies because safer assets like Treasuries or cash offer better risk-free returns.
Higher rates also make borrowing more pricey, which reduces speculative activity, leverage and venture capital investment.
Crypto market sentiment, which has already bottomed out, could also be further hit by a hawkish Federal Reserve.
Warehouse: Chinese New Year increases interest, TradFi buys cryptocurrency exchanges: Asia Express