The FOMC minutes have further cooled optimism about another rate cut at the December meeting. The minutes indicated that most Fed officials oppose a third cut this year, as they turn their attention to rising inflation. Bitcoin and the broader crypto market faced another intense sell-off today as hopes of a rate cut continue to fade.
FOMC Minutes Show May Officials Are Against A Third Rate Cut This Year
According to the October Fed meeting minutes, many participants suggested that it would likely be appropriate to keep the target range unchanged for the rest of the year based on their economic outlooks. This came as the minutes noted that participants expressed “strongly differing views” about what policy decision would most likely be appropriate at the December FOMC meeting.
The FOMC minutes stated that most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate as the committee moved to a more neutral policy stance over time. However, several of them didn’t necessarily view another 25 basis points cut as likely to be appropriate at the December FOMC meeting.
Meanwhile, several participants assessed that a further reduction in the target range for the federal funds rate could well be appropriate at the December meeting if the economy evolved as they expected between now and the meeting.
However, as CoinGape reported, the committee is unlikely to have enough data for the December meeting, as the BLS canceled the October jobs report, which traders believe makes it less likely the FOMC will lower rates. Ahead of the FOMC minutes release, the odds of a December Fed rate cut had already dropped to around 33.8%.
Now, the Fed minutes further indicate that the Fed is unlikely to lower rates, seeing as ‘many’ already believe it is appropriate to keep interest rates unchanged for the rest of the year. Bitcoin and the broader crypto market are already reacting negatively to this development, with the flagship crypto dropping below $90,000 today, reaching a new seven-month low of $88,800.
Source: TradingView; Bitcoin Daily ChartRisk Of Higher Inflation With Further Cuts
The FOMC minutes also stated that most participants noted that further interest rate cuts could add to the risk of higher inflation, against a backdrop of elevated inflation readings and a very gradual cooling of labor market conditions. They also opined that people could misinterpret further cuts as implying a lack of commitment by policymakers to the 2% inflation objective.
This aligns with Fed President Jeff Schmid’s recent statement. He stated that further rate cuts could have lasting effects on inflation, while he doesn’t expect them to do much to patch the cracks in the labor market.
However, a positive is that many of these participants also judged that the effect of this year’s higher tariffs on overall inflation would likely be more limited. As such, they stated that it was appropriate for the committee to ease its policy stance in response to downside risks to employment.
Source: https://coingape.com/fomc-minutes-many-fed-officials-oppose-further-rate-cuts-this-year-bitcoin-falls/
