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The Federal Reserve's January meeting minutes revealed a surprisingly hawkish committee. Several officials openly discussed rate hikes. That sets the stage for a dramatic policy clash when Kevin Warsh takes over as chair this summer.
The Fed's hawkish stance now threatens to box in Warsh before he even starts, raising the stakes for both monetary policy and crypto markets.
The FOMC voted 10-2 on Jan. 28 to hold rates at 3.5%-3.75%. Governors Christopher Waller and Stephen Miran dissented. Both preferred a quarter-point cut, citing labor market risks.
But the broader committee leaned the other way. Several participants warned that further easing amid elevated inflation could signal a weakened commitment to the 2% target. A larger group favored holding rates steady. They wanted a "clear indication that disinflation was firmly back on track" before cutting again.
Most strikingly, several officials wanted the post-meeting statement to reflect possible "upward adjustments" to the federal funds rate. This was a direct reference to potential rate hikes.
Chair Jerome Powell's term ends in May. He has two more meetings at the helm. Trump announced on Jan. 30 that former Fed Governor Warsh would replace him.
Warsh has spoken in favor of lower rates. That aligns with Trump's repeated calls for cheaper borrowing. The White House on Wednesday insisted recent data showed inflation was "cool and stable."
But the committee's hawkish majority may not cooperate. Rate decisions are made by 12 voting members. Only a few lean dovish. The rest see inflation risks as the top priority.
Analysts noted that the committee's hawkish tone could complicate Warsh's confirmation process and limit his room to pivot toward cuts early in his tenure.
If confirmed, Warsh's first meeting as chair would be in June. Futures traders price the next cut around the same time. But the Fed's preferred inflation gauge — the PCE Price Index — is expected to re-accelerate in the coming months. That could delay any easing further.
Bitcoin began sliding shortly after the minutes dropped during US afternoon trading. It fell from around $68,300 to below $66,500 by early Asian morning hours. That marked a 1.6% decline over 24 hours.
The timing mattered. Asian traders were returning from the Lunar New Year holiday. Rising volumes and turnover amplified the move lower. Escalating US-Iran tensions added fuel. Oil prices surged more than 4%, further weighing on risk appetite across crypto markets.
Coinbase CEO Brian Armstrong called the decline psychological rather than fundamental. He said the exchange was buying back shares and accumulating Bitcoin at lower prices.
The Fed's next meeting is on March 17-18. A cut there is effectively off the table. Markets now look to June as the earliest window.
But the real question extends beyond timing. It is whether Warsh can steer a deeply divided committee toward cuts while inflation remains sticky. The hawkish majority has made its position clear. Changing that will require more than a new chair.
For Bitcoin, the macro backdrop remains challenging. The combination of a hawkish Fed, a contested leadership transition, and returning Asian liquidity points to continued volatility in the weeks ahead.
