The January meeting report of the Federal Reserve, released on Wednesday, reveals an unexpectedly aggressive stance from policymakers, with several officials openly discussing the possibility of raising interest rates if inflation remains stubbornly high.
Bitcoin dropped sharply in response to this news, falling below 66,500 USD during trading in the Asian region
Fed officials disagreed but leaned toward the hawkish side
The U.S. Federal Open Market Committee (FOMC) voted 10 to 2 at the meeting on January 27-28 to keep the Fed's interest rate at 3.5%-3.75% after three consecutive cuts totaling 75 basis points between September and December 2025
Christopher Waller and Stephen Miran are considered dissenting voices, as both still want a further quarter-point cut, arguing that the labor market remains fragile without additional financial support
However, the majority of the committee appears to be clearly cautious. Many members warned that if additional policy easing occurs amid still-high inflation, it could be seen as a commitment to fall short of achieving the 2% target, and a larger group supports keeping interest rates unchanged. They want "clear signals that the process of reducing inflation is back on a steady path" before deciding to cut rates again
What is even more noteworthy is that many officials want the statement after the meeting to reflect the possibility of a "rate hike" by the Fed, which directly refers to raising interest rates
The report stated, "Most meeting participants warned that progress toward the Board's 2% target could be slower than previously thought and more uncertain than generally expected"
Powell's exit and Warsh's arrival add uncertainty
This aggressive stance will create tension with the new Fed leaders who are about to take office, as Jerome Powell's term as chair will end in May, and President Donald Trump has nominated former Fed governor Kevin Warsh to succeed him
Donald Trump has repeatedly called for rate cuts, and the White House confirmed on Wednesday that the latest data reflects "cooling and stable" inflation. However, the inflation gauge that the Fed focuses on is the Personal Consumption Expenditures (PCE) index, which is expected to accelerate again in the coming months. This could complicate the timeline for future rate cuts
Currently, investors in the futures market assess that the next rate cut will not occur any sooner than June, possibly followed by another in September or October
Bitcoin plunged due to hawkish signals and geopolitical risks
The crypto market reacted quickly, with Bitcoin starting to drop immediately after reports of the U.S. afternoon meeting. I saw the price drop from around 68,300 USD to below 66,500 USD in the early morning in Asia, losing 1.6% over a 24-hour period, with selling pressure intensifying as tensions between the U.S. and Iran escalated, pushing oil prices up more than 4%, which further reduced demand for risk assets
Brian Armstrong, CEO of Coinbase, has sought to reassure the market, stating that the recent decline seems to be driven more by psychological factors than by fundamental realities. He noted that the platform has repurchased shares and accumulated Bitcoin at lower prices
Market data shows that trading volume and turnover have increased as Asian market groups returned to trading after the Lunar New Year holiday, leading to increased selling pressure amid heightened macroeconomic uncertainty
As the Fed has signaled it will pause interest policy for a longer period and geopolitical risks have increased, the crypto market faces a challenging path ahead — at least until there are clearer signals regarding inflation and the direction of interest rate policy