The Federal Reserve released minutes from its Dec. 17-18 meeting on Wednesday, revealing growing concerns among officials about the economic impact of President-elect Donald Trump's policy proposals.
According to the minutes, the 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 called for a gradual approach to further monetary easing. Several officials stressed the importance of data-driven decisions, especially as inflation remains above target.
“Many participants suggested that a variety of factors underscored the need for a cautious approach to monetary policy decisions over the coming quarters,” the minutes noted.
However, some officials argued for flexibility. They pointed to scenarios in which rate cuts might be accelerated if inflation trends turn lower or if labor market conditions deteriorate more than expected. Despite these divergent views, the general sentiment was one of caution to avoid policy mistakes as the Fed continues to assess the neutral rate.
The minutes noted growing concerns about inflation risks, which many Fed members attributed to 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 recent higher-than-expected readings warrant close monitoring," the report added.
While the labor market has shown some slight easing, the unemployment rate remains low at 4.2%, and GDP growth is expected to remain strong. However, several participants pointed to financial pressures on lower-income households as a potential area of concern.
Market Reactions to the Federal Reserve's Position on Trump's Policies:Fed officials expressed particular concern about Trump’s proposed trade and immigration plans, which they believe could add to inflationary pressures. The minutes suggested that these policies could slow the Fed’s progress toward its inflation and employment goals.
“The potential for higher tariffs and tighter immigration restrictions could disrupt supply chains and labor markets, further complicating the Fed’s task,” one participant noted.
Critics were quick to respond. Zero Hedge, a popular user on X (formerly known as Twitter), commented on Fed officials’ concerns and response to the inflationary effects of Trump’s policies.
“So the Fed is not reactive (even when inflation is biting it in the ass), but proactively hostile toward a president’s policy with which it disagrees even if that policy does not exist.”
The cryptocurrency market felt the effects of the FOMC minutes, with Bitcoin (BTC) seeing a sharp decline. Shortly after the minutes were released, BTC dropped to 92,500$BTC The decline reflects the market's sensitivity to monetary policy uncertainty as the Fed's dovish tone left markets on edge.The decline in Bitcoin and the cryptocurrency market highlights the interplay between fiscal policy, monetary decisions, and market sentiment. The market reaction came as analysts continue to hope that Trump’s pro-crypto stance will significantly shape future market trends.
As BeInCrypto reported, Trump’s policies could boost crypto adoption. However, others see these policies also as a risk of regulatory tightening that could spark volatility.
According to BeInCrypto data, BTC was trading at $93,001.$BTC , down more than 3% since Thursday’s open. As Trump’s policies take shape in the coming months, the Fed’s balance will remain a focal point for both traditional and digital markets.