Fresh minutes from the January meeting of the Federal Open Market Committee (FOMC) reveal that U.S. Federal Reserve officials are far from united on the future of interest rates. While markets had largely expected a continuation of the recent easing cycle, the newly released notes show that some policymakers even floated the possibility of raising rates again if inflation refuses to cool.
The Federal Reserve ultimately voted to keep its benchmark rate unchanged at 3.5% to 3.75% during the January meeting. That decision followed three rate cuts at the end of 2025, which brought borrowing costs down from 4.5% to current levels. However, behind that unanimous hold decision lies a growing internal divide.
Rate Hikes Back on the Table?
If enacted, such a move would mark the first rate hike since July 2023, signaling a dramatic reversal from the easing momentum markets had priced in.
Despite the hawkish tone from some policymakers, futures markets currently show a 94% probability that rates will remain unchanged at the next Fed meeting on March 18, based on CME data. That suggests investors believe the more cautious voices inside the Fed will prevail - at least in the short term.
Inflation Progress Not Convincing Enough
The minutes highlight persistent concern among officials that progress toward the Fed’s 2% inflation target may be slower and more uneven than previously expected.
Some participants argued it would be appropriate to “hold the policy rate steady for some time” to better assess incoming economic data.
In other words, the Fed wants stronger evidence that inflation is sustainably trending downward before cutting again.
The latest data shows U.S. inflation, measured by the Consumer Price Index (CPI), currently sits at 2.4%, following a 0.2% increase in January. While close to target, the data has not convinced the more hawkish members that inflation risks are fully contained.
Most participants warned there remains a meaningful risk that inflation could stay above target longer than expected. If inflation declines in line with forecasts, however, the minutes note that rate reductions “would likely be appropriate.”
What It Means for Crypto Markets
Interest rate policy has become one of the most important macro drivers for digital assets. Higher interest rates are typically bearish for crypto, as they increase returns on safer assets like Treasury bonds and cash while raising borrowing costs.
When rates rise, speculative activity often declines. Venture capital slows. Leverage becomes more expensive. Risk appetite shrinks.
With crypto market sentiment already near multi-year lows, any shift toward a more hawkish Federal Reserve stance could weigh further on prices. A pause in rate cuts - or worse, a surprise hike - would likely dampen liquidity conditions across both traditional and digital markets.
At the same time, if inflation resumes a convincing downward trajectory and rate cuts return to the agenda, risk assets like Bitcoin and Ethereum could find renewed support.
For now, the Fed appears divided. The era of easy rate cuts is no longer guaranteed - and markets are being reminded that the battle against inflation is not fully over.
