Casey Wagner

<div id="highlights-block_61d5f93531524" class="highlights">
 <ul>
 <li>Bitcoin and ethereum lost gains following the minutes release, falling 0.8% and 2.6%, respectively</li>
 <li>Federal Reserve officials are starting to backtrack on earlier statements that inflation would be transitory</li>
 </ul>
 
</div>



Federal Reserve officials are becoming increasingly concerned about growing inflation and persisting bottlenecks and supply chain issues, minutes from the Dec. 14-15 Federal Open Markets Committee (FOMC) <a href="https://cms.blockworks.co/fed-gets-hawkish-doubles-taper-signals-three-rate-hikes-in-2022/" target="_blank" rel="noreferrer noopener">meeting</a> reveal.&nbsp;



Economic projections released in September stated that most central bank officials did not anticipate rate hikes until 2023. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20211215.pdf" target="_blank" rel="noreferrer noopener">Projections</a> from December however show that the majority of officials expect three rate hikes in 2022.&nbsp;



The shift is a hawkish move from the Fed and Powell, who for months insisted that bottleneck-induced inflation would ease naturally over time. The central bank has since backtracked on earlier statements and taken a more aggressive approach to combat higher prices.&nbsp;



“We are phasing out our purchases more rapidly because with elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support,” Powell said during a press conference in December following the conclusion of the two-day FOMC meeting.



<h3 class="wp-block-heading">Markets respond</h3>



Bitcoin and ethereum lost gains <meta charset="utf-8">following the release of the <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20211215.pdf" target="_blank" rel="noreferrer noopener">minutes</a> Wednesday afternoon, falling 0.8% and 2.6%, respectively.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Bitcoin is in desperate need of a catalyst as crypto traders struggle to buy ahead of the beginning of a Fed rate hiking cycle,” Edward Moya, senior market analyst at Oanda wrote in a recent note. “The cryptoverse remains long-term bullish with Bitcoin and Ethereum but the short-term downward move might not be over.”</blockquote>



Equities also largely fell. The big tech-heavy Nasdaq Composite Index lost 1.4% while the S&amp;P slipped 0.4%.&nbsp;



“Tech stocks remained under pressure after a robust private payrolls report sent Treasury yields higher,” Edward Moya, senior market analyst at Oanda, wrote in a recent note. “Equity traders are still betting on a strong US economy and that has them rotating out of big-tech and embracing cyclicals.”&nbsp;



Gold was trading 0.3% higher Wednesday as the dollar slipped, signaling that Fed rate hikes have largely already been priced in, Moya said.



The minutes come shortly after the New York Fed released its new “<a href="https://fedinprint.org/item/fednls/93594" target="_blank" rel="noreferrer noopener">Global Supply Chain Pressure Index</a>” Tuesday. The index incorporates the Baltic Dry Index, which measures raw material shipping costs, the Harpex Index, which accounts for container shipping rates, and US Bureau of Labor Statistics data. The index revealed that supply chain pressures at at a historic high.&nbsp;



“The data here shows that supply chain pressures remain extremely elevated and, while the Fed thinks the latest reading says the top is in, we are still far from normal’,” said Nicholas Colas, co-founder of DataTrek research. “This tells us inflation will remain an issue for at least several more months.”&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Federal Researve

Newsletter

Blockworks Research