Fed minutes reveal deep splits over timing of next rate cuts
Federal Reserve minutes from the Dec. 9–10 meeting show clear disagreement among policymakers about when to cut interest rates again. The Fed voted 9–3 to cut the policy rate by 25 basis points to a 3.50–3.75% range — the third consecutive cut — but several officials said the decision was “finely balanced.” Governor Stephen Miran pushed for a larger 50-basis-point cut, while Chicago Fed’s Austan Goolsbee and Kansas City’s Jeff Schmid voted to hold rates steady. The Fed’s median projection now shows just one 25-basis-point cut next year, though individual forecasts vary widely. Key indicators since December add to the confusion: unemployment rose to 4.6% in November and consumer prices were softer than expected (supporting cuts), but third-quarter GDP surged at a 4.3% annual pace (fueling inflation concerns). Policymakers noted that a recent government shutdown reduced the flow of economic data, making choices harder. Traders and markets should expect continued uncertainty over Fed policy and timing, with market pricing (futures) differing from the Fed’s median path.
Neutral
The Fed minutes point to policy uncertainty rather than a clear tightening or easing signal. For crypto markets, that typically translates to neutral-to-volatile conditions: no guaranteed liquidity boost from imminent aggressive cuts (which would be bullish), but also no strong hawkish shift to choke risk assets (which would be bearish). Key elements supporting a neutral view: (1) The December cut was passed but several officials opposed or viewed it as narrowly balanced, indicating that future cuts are not assured; (2) mixed data — higher unemployment and softer consumer prices argue for cuts, while a 4.3% GDP surge argues against them; (3) market pricing (futures) expects more cuts than the Fed’s median projection, creating potential for repricing and volatility if incoming data or Fed communication diverge from market bets. Historically, similar episodes of Fed internal division (e.g., mid-2019 and early 2022 communications shifts) produced sharp short-term moves in risk assets and elevated volatility, with crypto often reacting more violently than equities. Short-term implications: increased intraday and cross-asset volatility, trading opportunities around Fed-related data and Fed speakers, and sensitivity to US macro releases. Long-term implications: trajectory of rates remains uncertain; absent clearer dovish commitment, sustained bullish momentum in crypto from easier US financial conditions is less likely. Traders should hedge event risk, watch Fed speakers, and monitor economic releases (inflation, unemployment, GDP) for cues that could tip policy expectations.