The minutes of the much-anticipated Federal Reserve’s final meeting have been released. The gold market managed to retain some of its daily gains following the release of its minutes. The cryptocurrency market, on the other hand, gave back some of the daily gains. Leading crypto Bitcoin slipped below the 17k threshold. Meanwhile, the collapsed cryptocurrency exchange FTX was also mentioned in the minutes.
Fed doesn’t want undue easing
At the December meeting, Fed officials reaffirmed their commitment to reducing inflation. They also warned against ‘unnecessary’ relaxation of financial conditions. Accordingly, they stated that this would hinder their efforts. The meeting minutes also revealed that officials were concerned about any ‘misperception’ of their actions in the financial markets. The minutes of the December 13-14 meeting of the Federal Open Market Committee (FOMC) included the following statement:
Respondents noted that, since monetary policy operates to a large extent through financial markets, an undue easing in financial conditions would complicate the committee’s efforts to restore price stability, especially if it is due to public misconception of the committee’s response function.
cryptocoin.com As you follow, at the last meeting of the year, the Fed slowed the increase by 50 basis points. However, it remained very determined in its target of reducing inflation to 2%. Fed Chairman Jerome Powell has warned markets that interest rates are not restrictive enough and will need to stay higher for longer. In the minutes, officials pointed out that the slowdown in interest rate hikes does not mean that financial conditions ease. The minutes included the following statements on the subject:
Some participants stressed that it would be important to make it clear that the slowdown in rate hikes is not an indication of any weakening of the Committee’s commitment to achieving the price stability target, or that inflation is currently in a downward trend.
Committee members lined up with Powell on determination.
Fed Chairman Jerome Powell told reporters after the December FOMC meeting that the longer the US central bank needs to keep interest rates high, the narrower the runway for a soft landing. “I don’t think anyone knows if we’re going to go into a recession,” Powell said. And if we go in, you don’t know if it will be deep,” he said.
The latest median forecast for 2023 suggests rates could rise to 5.1%. The Fed also expects real GDP to reach 0.5% in 2023 and PCE inflation to fall to 3.1% in 2023. The minutes revealed that officials acknowledged ‘significant progress’ after rates increased by 425 basis points in 2022. He also noted that he was concerned about the potential risk of over-tightening. The minutes highlighted the following:
The lagged cumulative effect of policy tightening could become more restrictive than necessary to bring inflation down to 2%. It could also lead to an unnecessary reduction in economic activity, potentially placing the greatest burden on the most vulnerable groups of the population. Most respondents stressed the need to maintain flexibility and discretion while taking policy to a more restrictive stance.
Another important point was the statements stating that ‘no participant thought it would be appropriate to start lowering the federal funds rate target in 2023’. Fed officials also agreed with Powell’s overall message, pointing out that a restrictive policy stance should be maintained ‘for a little while’.
Gold and Bitcoin (BTC) reaction to Fed minutes
Gold was largely unchanged after the Fed’s meeting minutes were released. February Comex gold futures are trading at $1,856.70, up 0.57% on the day. Gold hit a six-month high of $1,871.30 earlier in the session. But it has since given back some of those gains.
The cryptocurrency market has started to move forward in the green zone today. The leading crypto Bitcoin price has come to the threshold of the psychological level of $ 17 thousand. However, he waived some of his earnings following the minutes. However, it was trading at $16.8k at the time of its success, gaining over 1% on a daily basis. Hence, the minutes did not have a serious impact on Bitcoin.
In the meantime, it was seen that the collapsed cryptocurrency exchange FTX was also included in the minutes. Regarding the subject, the minutes included the statement “This situation is not a risk for the financial system”.