#USSeeksStrategicBitcoinReserve #FedHoldsRateButDividesDeepen

#FedHoldsRateButDividesDeepen
Rate Held Steady, but the Crack Inside the Fed Is Widening
The US Federal Reserve held its policy rate steady at 3.50%-3.75%. But the decision came with the most divided vote since 1992: 8 to 4. The dove-hawk split is now clearly on the table, and the reason is one word: Oil.

1. 8-4: Most Divided Fed Since 1992
At the FOMC meeting, 4 members dissented. Three regional presidents — Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan — supported holding rates steady but objected to the “easing bias” language in the decision text. Their reasoning is clear: The oil shock from the Iran war is increasing inflation risk, and in this environment, implying the next step will be a cut is not right.

The fourth dissent was in the opposite direction: Governor Stephen Miran wanted a quarter-point cut.

Result: The Fed kept the “next step is likely a cut” signal in the text, but Chair Jerome Powell acknowledged this is an increasingly shrinking majority view.

2. The Oil Shock Changed the Equation
Brent crude hit $120 and has doubled since the start of the year. The Fed’s dilemma is clear: Raise rates to curb inflation, or cut to support growth damaged by war?

Hammack said, “Inflation pressures are broad-based and rising oil prices create additional pressure. An easing bias is no longer appropriate.” Kashkari was even clearer: If the Strait of Hormuz stays closed for long, “potentially a series of rate hikes” may be needed.

Logan argued that “the next rate change could be a hike or a cut,” and that no guidance should be given.

3. Signal from Powell: “We’re Moving to Neutral”
Powell said the center of the committee has “shifted to a more neutral place.” Neutral means a level where the economy is neither heating nor cooling, and rates could go either way. In other words, the “rate-cut cycle” rhetoric that has lasted 18 months is ending. Powell’s description: “We first move to a neutral bias, then if we want to raise rates, we move to a hiking bias.”

4. Market Pricing: Cuts Pushed to 2027
According to CME FedWatch, expectations for the next cut have shifted to the end of 2027. That’s 4 quarters later than the mid-2026 expectation at the start of the year. Morgan Stanley, Goldman Sachs, and J.P. Morgan shelved their 2026 cut forecasts. Reason: Inflation remains above the 2% target, the labor market is strong, and oil risk is on the table.

5. Political Shadow: The Warsh Era Begins
This was Powell’s last meeting as chair. His term expires May 15 and Trump’s nominee Kevin Warsh is expected to be the new chair. But analysts note Warsh will also inherit a divided committee. While Trump wants aggressive cuts down to 1%, voices advocating hikes are rising inside the committee.

6. What It Means for Markets
1. Volatility Increases: Disagreement among central banks means uncertainty in policy communication. According to Reuters, this means “blurrier messaging and volatility” for investors. 2. Energy = Inflation: For the first time, the Fed text included “Developments in the Middle East add high uncertainty to the economic outlook.” Oil is the new variable in the rate path. 3. The Rate-Cut Bet Is Closing: Dallas Fed’s Logan: “Forward guidance implying cuts should no longer be given.”
Note to Gate Square Investors
For crypto markets, the Fed’s shift to neutral cuts both ways. While expectations for a liquidity tap are fading, oil-driven inflation could support Bitcoin’s “digital gold” thesis. But the possibility of rates rising instead of falling creates pressure on risk assets. This week’s 8-4 split shows the Fed will stay in wait-and-see mode through the second half of 2026.

After the decision, the S&P 500 and bonds fell. The message is clear: The Fed is no longer promising cuts. The next move is data-dependent, and that data is currently passing through the Strait of Hormuz.

Always do your own research (DYOR).

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