The Federal Reserve on Wednesday (8) released the minutes of its Dec. 17-18 meeting, revealing growing concerns among officials about the economic impact of President-elect Donald Trump's policy proposals.
Based on the minutes, the Federal Open Market Committee (FOMC) discussed a range of issues, from inflation risks to the expected slowdown in rate cuts, reflecting the Fed's cautious approach heading into 2025.
Fed's cautious approach to rate cuts amid inflation, economic risks
The FOMC minutes highlighted the decision to implement a 25 basis point (0.25%) rate cut. Almost all participants advocated a gradual approach to further monetary easing. Several officials emphasized the importance of data-driven decisions, especially as inflation remains above target levels.
Many participants suggested that a variety of factors underscored the need for a careful approach to monetary policy decisions in the coming quarters, the minutes noted.
Some officials, however, argued for flexibility. They pointed to scenarios where rate cuts could be accelerated if inflation falls or labor market conditions deteriorate more than expected. Despite these divergent views, the prevailing sentiment was one of caution to avoid policy mistakes while the Fed continues to assess the neutral rate.
The minutes indicated growing concern about inflation risks, which many Fed officials blamed on Trump’s trade and immigration policies. Core personal consumption expenditures (PCE) inflation was 2.8% in October, and officials expected progress in reducing it to be slower than initially anticipated.
Inflation risks remain balanced, although higher-than-expected recent readings warrant close monitoring, the report added.
While the labor market has shown some relief, unemployment remains low at 4.2 percent, and GDP growth is expected to remain solid. However, several participants pointed to financial strains in low-income households as a potential area of concern.
Markets react to Fed's stance on Trump policies
Fed officials expressed particular concern about Trump's proposed trade and immigration plans, which they believe could exacerbate inflationary pressures. The minutes suggested those policies could slow the Fed's progress toward its inflation and employment goals.
The potential for higher tariffs and tighter immigration controls could disrupt supply chains and labor markets, further complicating the Fed's task, one participant noted.
Critics were quick to react. Zero Hedge, a popular user on X (formerly Twitter), commented on Fed officials’ concerns and response to the inflationary impacts of Trump’s policies.
So the Fed is not reactive (even when inflation is biting), but is PROACTIVELY hostile to the policy of a president with whom it disagrees, even if such a policy does not even exist, he said.
The crypto market felt the effects of the FOMC minutes, with Bitcoin (BTC) experiencing a sharp drop. Soon after the minutes were released, BTC plummeted to $92,500. This drop reflects the market’s sensitivity to monetary policy uncertainties, as the Fed’s cautious tone has put markets on alert.
The Bitcoin and crypto market crash highlights the interplay between fiscal policy, monetary decisions, and market sentiment. The market reaction comes as analysts continue to expect Trump’s pro-crypto stance to significantly influence future market trends.
As reported by BeInCrypto, Trump’s policies could boost cryptocurrency adoption. However, others argue that these policies also bring regulatory tightening risks that could increase volatility.
BTC Price Performance. Source: BeInCrypto
According to data from BeInCrypto, Bitcoin was trading for US$93,001 at the time of reporting, a drop of more than 3% since the opening of the session on Thursday (9). As Trump's policies take shape in the coming months, the Fed's balance will continue to be a focal point for traditional and crypto markets.
The article BTC drops to $93,000 amid Fed fears over Trump appeared first on BeInCrypto Brasil.
