The Federal Reserve’s January meeting minutes, released Wednesday, revealed a surprisingly hawkish shift among policymakers, with several officials openly discussing the possibility of rate hikes if inflation remains stubbornly elevated.
Bitcoin fell sharply in response, sliding below $66,500 during Asian trading hours.
Fed Officials Divided but Leaning Hawkish
The US Federal Open Market Committee (FOMC) voted 10-2 at its Jan. 27-28 meeting to hold the federal funds rate steady at 3.5%-3.75%, after three consecutive cuts totaling 75 basis points between September and December 2025.
Governors Christopher Waller and Stephen Miran were the two dissenters, preferring a quarter-point reduction and arguing that the labor market remained vulnerable without further monetary support.
However, the broader committee struck a notably cautious tone. Several participants warned that further easing amid elevated inflation could signal a weakened commitment to the 2% target. A larger group favored holding rates steady. They wanted a “clear indication that disinflation was firmly back on track” before cutting again.
Most strikingly, several officials wanted the post-meeting statement to reflect possible “upward adjustments” to the federal funds rate. This was a direct reference to potential rate hikes.
“Most participants cautioned that progress toward the Committee’s 2% objective might be slower and more uneven than generally expected,” the minutes stated.
Powell’s Exit and Warsh’s Arrival Add Uncertainty
The hawkish tilt sets up a potential clash with the incoming Fed leadership. Chair Jerome Powell’s term ends in May, and President Donald Trump has nominated former Fed Governor Kevin Warsh as his replacement.
Trump has repeatedly called for lower interest rates, and the White House on Wednesday insisted that recent data showed inflation was “cool and stable.” However, the Fed’s preferred inflation gauge is the Personal Consumption Expenditures (PCE) Price Index. The PCE is expected to re-accelerate in the coming months. That could complicate the timeline for any future rate cuts.
Futures traders currently price the next rate cut no sooner than June, with a possible follow-up in September or October.
Bitcoin Slides on Hawkish Tone and Geopolitical Risks
The crypto market reacted swiftly. Bitcoin began sliding shortly after the minutes dropped during US afternoon trading. It fell from around $68,300 to below $66,500 by early Asian morning hours. That marked a 1.6% decline over 24 hours. The selloff intensified as rising US-Iran tensions pushed oil prices up more than 4%, further dampening risk appetite.
Coinbase CEO Brian Armstrong sought to calm markets, stating that the recent decline appeared to be driven more by psychological factors than by fundamentals. He noted the exchange was buying back shares and accumulating Bitcoin at lower prices.
Market data showed trading volumes and turnover rising as Asian markets returned from the Lunar New Year holiday, amplifying selling pressure amid heightened macroeconomic uncertainty.
With the Fed signaling an extended pause and geopolitical risks mounting, crypto markets face a challenging path ahead — at least until clearer signals emerge regarding both inflation and the direction of rate policy.
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