The Federal Reserve's June meeting minutes show encouraging signs of an interest rate cut this year.
A July 30th rate cut is possible, with some Fed officials openly supporting it if inflation remains controlled.
The Fed is currently struggling to balance possible tariff-fueled inflation with signs of a weakening labor market/consumer spending.
The overall tone of the Fed minutes was "lightly dovish," and investors are expecting a crypto boom from a possible rate cut soon.
Lower interest rates generally benefit risk assets like cryptocurrencies, and August could be “crypto month”.
The U.S. Federal Reserve has made it clear that interest rate cuts are on the table for this year.
However, “exactly when” this will happen is still up for debate.
Per recent developments, the minutes from the Fed’s June 17–18 policy meeting, which was released on July 9, now shows great signs of an incoming rate cut.
Here’s why a cut could be incoming on 30 July, and why August could be a great month for the crypto market.
At their last meeting in June, the Fed kept the benchmark federal funds rate steady at a range of 4.25% to 4.5%.
This marked the fourth consecutive meeting without a change, which has frustrated many investors.
However, behind that vote lies something bigger.
The minutes show that “most participants assessed that some reduction in the target range for the federal funds rate this year would likely be appropriate.”
In essence, this means that the majority of officials expect at least one rate cut this year, as long as inflation continues to ease and economic growth doesn’t surprise on the upside.
Recession talks might be back on the table | Source: Twitter
Still, the FED’s internal forecasts are still divided.
For example, some officials believe cuts could start as early as the next policy meeting on July 30, while others see no need for rate reductions at all.
Fed Governors Michelle Bowman and Christopher Waller have publicly shown that they are open to a July cut if inflation remains under control.
Still, “several” officials feel that current rates are already close to a neutral level and acting too quickly could be a bad idea.
This is especially with inflation still running above the Fed’s 2% target.
The Fed is now facing a hard balancing act. On one hand, tariff-driven inflation has created issues for the agency, especially after President Donald Trump’s recent wave of import duties on major U.S. trading partners.
These tariffs started in April and have been changing almost weekly as trade negotiations continue.
While most Fed members believe the effects of these tariffs will be temporary or relatively muted, a few believe that the risk of longer-term price pressure is a strong one, if companies pass costs onto consumers.
Trump pressures the FED | Source: Twitter
At the same time, there are rising signs of weakness in the labor market and consumer spending.
Nonfarm payrolls rose by 147,000 in June, which is above expectations but well below the pace seen earlier in the year.
The unemployment rate also dipped unexpectedly to 4.1%, but personal consumption fell by 0.1% in May and retail sales dropped a sharp 0.9%.
This combination of mixed signals leaves the Fed in “wait-and-see” mode.
The minutes showed clearly: “Participants agreed that although uncertainty about inflation and the economic outlook had decreased, it remained appropriate to take a careful approach.”
Despite the internal debates, the overall tone of the Fed minutes was still lightly dovish, and investors believe that this is a hint that a rate cut could happen as soon as the July 30 meeting.
This, of course, will depend on incoming data, especially the Consumer Price Index (CPI) report for June, which is due this week on 11 July.
Officials predict rate cuts soon | Source: Twitter
Lower interest rates generally support risk assets by improving liquidity and reducing the opportunity cost of holding non-yielding investments like Bitcoin.
As a result, crypto markets stayed stable after the minutes were released. Bitcoin hovered around $109,000, while Ethereum traded near $2,700.
The Fed’s tone hasn’t sparked a rally yet. However, it hasn’t spooked investors either and traders are waiting for confirmation from both the CPI data and future Fed statements before making big moves.
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