The US Federal Reserve published the minutes of the last Federal Open Market Committee (FOMC) meeting held on May 2-3, presenting the summary, explanation and view of each member of the previous rate hike. Officials differ in support for further rate hikes, according to the minutes. Gold and Bitcoin price fell after Fed Minutes.
Fed members split, gold and Bitcoin drop!
The FOMC meeting minutes led to a limited bearish reaction in the gold and Bitcoin markets. The US dollar, on the other hand, continued to outperform its main rivals following the minutes. The US Dollar Index recently rose 0.4% to reach 103.91. According to the document, officials support two opposing views on support for further rate hikes. The minutes highlight that inflation is still “unacceptably high”. In addition, participants agree that there is a “slight recession” this year.
cryptocoin.com As you follow, in May, the Fed increased its core interest rates by 25 basis points. Thus, he increased the policy rate to the level of 5.00 – 5.25%. The central bank hinted at a possible pause at the meeting on 13-14 June. Economic data from the US since the May meeting have been mixed, but far from pointing to a recession. The Consumer Price Index (CPI) slowed to 4.9% in April. However, Core CPI increased to 5.5% compared to the previous year. Meanwhile, on Friday, the US will release its Core Personal Consumption Spending Price Index for April, the Fed’s preferred inflation indicator.
Inferences from Fed Minutes
Meanwhile, it is possible to draw the following additional conclusions from the Fed minutes:
- Prudent risk management may suggest not making an increase in June, depending on the inflation data and the fact that banking conditions are not over tightened, but rather tend to the July increase.
- More slackening is needed in the labor market, which is too tight to recover from high inflation.
- There is concern that no progress has been made on inflation.
- There is concern that inflation will not fall much unless average hourly wage growth approaches 3%.
- April PCE inflation, May CPI data will be critical.
- There is more uncertainty than usual about credit terms.
- Fighting inflation continues to be my priority.
Fed Minutes showed limited impact on Bitcoin and gold
Fed officials are in a stalemate despite the general agreement that inflation is still “unacceptably high” and they continue to see a “mild recession” this year. This distorts the forecast of the CME Group FedWatch tool, which puts a 75% probability that the Fed will keep rates unchanged in June.
Some of the more dovish FOMC members showed a trend towards rate pauses, warning that retaliation for a series of bank crashes in the spring would have a similar effect on financial conditions as rate hikes, the data showed. Such a result means the Fed does not need to raise interest rates as aggressively as it once stated. On the other hand, another group of members displayed a hawkish attitude. These put pressure on further rate hikes in hopes of curbing inflation.
According to analysts, 25 basis points up or down won’t make much difference for the Dollar. Instead, it’s about how hawkish the Fed really is. Gold and Bitcoin prices are likely to fall if minutes and data show that the Fed can do more or that the market’s rate cut expectations for the second half of the year are overly ambitious and may need to be adjusted.
Bitcoin and crypto market reaction to Fed minutes
Markets went on sale hours before the minutes were released, possibly due to fears of global inflation. However, according to crypto analyst Lockridge Okoth, it is possible for Bitcoin to continue its boring price action as the FOMC minutes do not give direction. This is to be expected given that BTC failed to react significantly to the interest rate hike on May 2-3. However, in case the FOMC raises more interest rates, traders should expect a drop in Bitcoin (BTC) price, potentially to $25,000, or at worst to $24,000.
BTC 1-Day ChartAt press time, the Bitcoin price was at $26,320. Meanwhile, it saw a daily drop of 3.35% as it eased towards the $25,000 support.
