The Federal Reserve’s December 17-18 meeting minutes reveal officials’ growing concerns about inflation and the potential economic effects of President-elect Donald Trump’s policies.
The Federal Open Market Committee (FOMC) decided on a cautious 25-basis-point rate cut, reflecting its focus on measured monetary easing.
Most Fed officials advocated for a gradual approach, emphasizing the need to keep inflation in check. While some argued for flexibility in case inflation trends downward or the labor market weakens, the general consensus was to avoid rash policy changes.
Inflation Risks and Economic Worries
The FOMC minutes highlighted rising inflation risks, which many attributed to Trump’s trade and immigration policies. Core personal consumption expenditures (PCE) inflation reached 2.8% in October, with slower-than-expected progress in reducing it.
Despite a slightly easing labor market, unemployment remains low at 4.2%, and GDP growth appears solid. However, officials raised concerns about financial strains on lower-income households. These factors underline the Fed’s cautious approach in navigating potential policy impacts.
Market Reactions to Fed’s Concerns
Markets responded sharply to the Fed’s cautious tone and its worries about Trump’s policies. Bitcoin (BTC), sensitive to monetary policy shifts, plunged to $92,500 shortly after the minutes were released. The crypto market mirrored this downturn, reflecting its vulnerability to fiscal and monetary uncertainties.
The Fed’s concerns about Trump’s trade and immigration plans add to the uncertainty. Critics argue these policies could exacerbate inflation pressures, complicating the Fed’s efforts to meet its inflation and employment goals.
Trump’s Pro-Crypto Policies: Hope or Risk?
Trump’s pro-crypto stance continues to divide analysts. While some believe his policies could boost cryptocurrency adoption, others worry about regulatory tightening, which may increase market volatility.
As of now, Bitcoin is trading at $93,001, down over 3% since the Thursday session opened. The interplay between fiscal policies, monetary decisions, and market sentiment will remain crucial as Trump’s policies take shape in the months ahead.
