- The Federal Reserve has released the minutes of the FOMC meeting held on May 2-3.
- Officials were split on support for more interest rate hikes.
- Inflation was determined to be still “unacceptably high,” hence the prospects for a “mild recession” later this year.
- As expected, the minutes did not excite a notable reaction from Bitcoin price.
The US Federal Reserve has released the minutes of the last Federal Open Market Committee (FOMC) meeting held on May 2-3, providing a summary and explanation of the previous interest rate hike and every member’s opinion. From the minutes, officials were split on support for more interest rate hikes.
Market participants were eager to see the Fed's stance on inflation, economic growth, and interest rates, as these will have a bearing on financial markets going forward.
FOMC Minutes show limited impact on Bitcoin
Federal Reserve officials raised interest rates by a quarter-point to a level of 5-5.5% during the central bank’s policy meeting on May 2-3. This happened despite debate over whether pausing tightening efforts would instead be the more advisable move. While the release, as is the norm, comes several weeks after each meeting, market participants were just as keen, looking for clues about how central bank officials are feeling, and with the hope of clear guidelines on where monetary policy is likely headed over the next several weeks or months.
Well, the results are out and the Fed officials are at an impasse, despite the general agreement that inflation was still “unacceptably high,” and they continue to see a “mild recession” later this year.
This throws off the CME Group FedWatch tool prediction that assigned a 75% chance of the Fed keeping rates unchanged in June.
From the reading, some of the more dovish FOMC members demonstrated an inclination toward rate pauses, cautioning that the reprisal from a series of bank collapses during spring would have a similar effect on financial conditions as rate hikes do. Such an outcome, in turn, would mean that the Fed did not have to raise rates as aggressively as it had once indicated. On the other hand, another cohort of members was hawkish, pushing for more rate hikes with hopes of curbing inflation.
Earlier, Fed Chairman Jerome Powell had dismissed the concerns with his announcement of a quarter-point increase, emphasizing that the banking system was sound, and articulating his view that the economy could avoid a recession.
Citing a comment from the FXStreet Insights Team,
25 bps more or less will not make much difference for the Dollar, something we have often pointed out. Instead, it is about how hawkish the Fed actually is.
In their opinion, provided the comments and data suggest that the Fed could deliver more or that the market’s rate cut expectations for the second half of the year are overly ambitious and might have to be adjusted, Bitcoin price is likely to head lower.
Bitcoin price and crypto market reaction to FOMC minutes
Markets were selling off hours before the release, possibly because of global inflation fears. However, as the FOMC minutes have not given direction, Bitcoin could continue its boring price action. This is expected, considering the king crypto failed to react significantly to the May 2-3 rate hike.
Nevertheless, if the FOMC moves toward a consideration of more interest rate hikes to come, traders should expect a dip in Bitcoin (BTC) price, potentially to tag the $25,000 level, or in the dire case, a leg down to the $24,000 level.
BTC/USDT 1-Day Chart
At the time of writing, Bitcoin price is $26,320, a daily drop of 3.35% as it eases towards the $25,000 support.
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