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Bitcoin Falls as FOMC Signals Resurgence of Inflation and Holds Steady on Rates
The Fed announced a pause on interest rate hikes as widely expected on Wednesday, maintaining the federal funds rate at 3.50%–3.75%. However, this decision was overshadowed by significant disagreements and stern warnings about geopolitical risks.
Perhaps the most important takeaway from today’s FOMC is that, after months of describing inflation as “still somewhat high” in their policy statements, the language has now changed.
Fed Holds Rates, Markets Respond
Amid rising energy prices, the Fed now describes inflation as “high,” indicating cost pressures are re-emerging.
“High inflation, partly driven by recent increases in global energy prices,” according to the report.
Nevertheless, this FOMC decision shows rare division, with Beth Hammack, Neel Kashkari, and Lorie Logan opting to reject any signals of easing in the policy statement, even though they agree to keep rates steady.
Their disagreement signals increasing resistance within the committee to signaling rate cuts too early.
This level of dissent is the largest since the disagreement in the October 1992 FOMC, indicating growing splits over the future direction of monetary policy.
In addition to internal divisions, the Fed also adopted a more cautious stance regarding global risks. Officials explicitly stated that “developments in the Middle East add a high degree of uncertainty.” This highlights how rising geopolitical tensions are complicating economic outlooks.
Fed Chair Jerome Powell and the majority of members maintain that economic activity remains solid, while inflation remains high.
However, the lack of a clear easing signal suggests policymakers are still unsure whether inflation is truly on a sustainable path toward the 2% target.
Most markets had already priced in no rate change, but the increasing dissent and the removal of dovish signals could lead to a reassessment of expectations for rate cuts by the end of the year.
Bitcoin’s price continued to decline, dropping further below the US$75,000 threshold, in a typical “sell the news” scenario.
With disagreements among policymakers and escalating global uncertainties, the Fed’s new decision indicates that the path toward monetary easing will be more complicated and may take longer, keeping investors cautious as they await upcoming data and meetings.