Fed Minutes Reveal Inflation Concerns, Halting Market Euphoria Following Trump Election

The release of the minutes from the Fed's December meeting has dropped, providing more insight into why they're slowing rate cuts for this year.

The first major macroeconomic news of 2025 has arrived…and it’s not great.

The minutes from the Fed’s December meeting dropped on Wednesday, providing more insight into why they’re slowing rate cuts for this year.

The short answer: inflation has been stickier than hoped.

An initial announcement of this news last month caused some panic in the markets, halting what had been a euphoric run following Donald Trump’s election in November.

But Trump’s pro-crypto stance may be somewhat offset by his other policies, which the Feds believe may keep inflation above the target of 2% annually.

Some of Trump’s biggest election promises revolved around global trade and immigration. In particular, he plans to introduce trade tariffs on Chinese product imports – something US economists believe may cause inflation to hang around like a bad smell.

That said, it appears the Trump Government may be considering a more conservative approach to trade and immigration policies, which could temper fears.

But in general, there’s a lot of economic uncertainty at the minute, and most are adopting a “wait-and-see” stance to see how Trump’s policies impact the US dollar.

Despite the seemingly negative news, the crypto markets have demonstrated resilience. Bitcoin has fallen below US $100k (AU $160k) – but the drop-off has been relatively tame, with several major coins moving sideways rather than downwards over the past month.

US Jobs Report Could Offer Clues on Economic Trajectory

Generally, higher interest rates spell bad news for cryptocurrencies. High interest rates mean less liquidity, and in such economic times, investors tend to prefer risk-averse assets compared to volatile ones like digital assets.

So, a slowdown in rate cuts through 2025 – as the FOMC minutes allude to – could prevent crypto from running as hard as many had hoped.

That said, the short-term uncertainty and pain could lead to longer-term solidity across the financial markets.

Theoretically, if the Feds were to cut rates hard – while ignoring inflation – the market may run quite hot. Too hot, perhaps.

This could come with the side effect of even higher inflation and end up worse than a slow and steady stabilisation of the economy, which is the Reserve Bank’s current mindset.

In general, navigating fiscal policy, especially with a new incoming president, is a difficult task. But “bad” short-term news for the markets isn’t always as negative as it may seem.

Now, the community awaits the US jobs report, slated for release on Friday, to re-assess the state of the national economy.