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In December, Powell’s statements plunged cryptocurrencies into ongoing negativity, which was exacerbated by recent data. Altcoin investors are currently facing losses exceeding 20%. This raises the question: what do the Fed Minutes tell us?
Understanding the Fed Minutes
Powell hinted at two potential interest rate cuts this year. However, his statements from the December meeting were disappointing, leading to discussions about a single rate cut possibility in the markets this year. The cessation of interest rate cuts and easing would indicate a downturn in risk markets.
The Fed Minutes were crucial this week for this very reason. Analysts were looking for more stringent, hawkish messages beyond Powell’s remarks. Despite the low likelihood, some experts were hopeful for optimistic details today.
Key details from the Fed Minutes include:
- Some participants included temporary forecasts regarding potential trade and immigration policy changes in their projections.
- Participants expect inflation to continue moving towards 2%, although potential policy changes may prolong this process.
- It would be appropriate to gradually move towards a more neutral policy stance if data aligns with expectations.
- Participants anticipate that labor market conditions will remain strong.
- Following data analysis and assumptions about potential policy changes from the new administration, Fed officials forecast slightly lower GDP growth and a higher unemployment rate than previously anticipated.
- Some participants argued for maintaining the current interest rates due to the high risk of sustained inflation.
- The majority of participants deemed a 25 basis point reduction in the target range appropriate during the December meeting.
The good news is that we do not see excessively hawkish remarks in the minutes following Powell’s statements. This suggests that cryptocurrencies might find some relief after today’s ADP data. If Friday’s data also favors risk markets, we could witness further gains.
