Fed minutes have markets dipping, traders calling for more rate hikes

The central bank is not yet done increasing interest rates, minutes from last month’s meeting reveal


Federal Reserve Chair Jerome Powell | Brookings Institute/"Jerome Powell" (CC license)


Minutes from the Federal Reserve’s June policy-setting meeting have markets in the red as investors speculate how many more rate hikes might be up central banker’s sleeves. 

The pace of rate hikes is expected to slow, central bankers said on Wednesday, but hikes nonetheless should be expected. 

“Many also noted that, after rapidly tightening the stance of monetary policy last year, the Committee had slowed the pace of tightening and that a further moderation in the pace of policy firming was appropriate in order to provide additional time to observe the effects of cumulative tightening and assess their implications for policy,” the minutes read. 

Minutes from last month show that central bankers are still concerned about persistent inflation, and what some traders were hoping would be a conclusion to the recent era of tight monetary policy might simply be a pause. In June, committee members elected to keep rates the same, marking the central bank’s first rate increase pause in 15 months. 

Crypto assets slid on the news, with bitcoin and ether down about 0.8% and 1.2%, respectively. Both are still in the green over the last month though, with bitcoin gaining close to 19% since early June and ether up around 6%. 

Equities dipped slightly in the moments after the release. The S&P 500 and Nasdaq Composite indexes lost about 0.2% and 0.1%, respectively. 

Traders are still largely anticipating a 25 basis point increase at the Fed’s next policy-setting meeting later this month. Markets seem to be pricing in an 89% likelihood of a small increase, according to data from CME Group. 

Bitcoin has managed to hold above $30,000, a key resistance level analysts have been watching, since June 23. A sustained rally is dependent on equity performance and macro indicators, analysts say. 

“While the crypto market has been marching to a more optimistic drummer of late, we can’t assume it won’t be affected by a stock market sell-off or a sudden shift in rates expectations,” Noelle Acheson, author of Crypto is Macro Now and former head of market insights at Genesis, said in a note Wednesday. 

“It does have unique drivers, which will lend support; but many crypto investors breathe the same air as traditional asset investors, and it feels like it’s getting a bit thin.”

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