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The Federal Reserve's (Fed) latest meeting minutes show that the possibility of interest rate hikes remains on the table, signaling a new risk for Bitcoin (BTC) and the crypto market.
The Federal Open Market Committee (FOMC) minutes for January have been released, revealing a more “hawkish” outlook than expected. According to the minutes, some policymakers indicated that if inflation remains above the target, there could be an upward adjustment in the policy rate. The Fed kept interest rates steady in the 3.5–3.75% range at the January meeting.
The Fed’s signal of three rate cuts in the last quarter of 2025, followed by a potential rate hike, is particularly notable for risky assets. According to CME futures markets, there is a 94% chance that rates will remain unchanged at the March 18 meeting. However, the language in the minutes suggests that the process of inflation returning to the 2% target could be slower and more volatile than expected.
Inflation Still Above Target
The US annual CPI stands at 2.4%. In January, it increased by 0.2% month-over-month. Fed officials emphasized that they will not favor further rate cuts unless there is clear evidence that inflation is permanently on a downward trend.
Some members argued that maintaining the current policy rate for a while longer is necessary to assess economic data. This approach weakens the market’s expectation of a rapid easing scenario.
How Do High Rates Affect Crypto?
Rate hikes are generally viewed as negative for Bitcoin (BTC) and the crypto market. In a high-interest environment, investors tend to shift toward lower-risk instruments. Additionally, rising borrowing costs limit speculative trading and leveraged positions.
In a crypto market already showing signs of fragility, the Fed’s potential tightening could further suppress risk appetite. If inflation declines in line with expectations, rate cuts could be reconsidered. However, the current outlook indicates that a cautious stance from the Fed will be maintained in the short term.