The Federal Reserve’s (FED) December meeting minutes just dropped, and it wasn’t exactly a warm hug.
Inflation is up, rate cuts are looking scarce, and Trump’s economic policies are still casting a long shadow, even if he didn’t get a shout-out in the official notes.
No rush
The minutes revealed that almost all participants judged that upside risks to the inflation outlook had increased.
Translation: officials are sweating over rising inflation reports and the potential fallout from shifts in trade and immigration policies.
As a result, they hinted that rate cuts might not come as quickly as some traders hoped.
But did Wall Street throw a tantrum? Nope! The S&P 500 edged up by 0.16%, the Dow Jones ticked up 0.25%, and even the Nasdaq, despite being dragged down by tough days for big names like Palantir and Bitcoin giant MicroStrategy, only dipped 0.06%. No panic here, investors have seen worse and acted like it.
Safe and sound investment?
In case of treasury yields, the 10-year yield shot up to 4.73% during intraday trading, hitting its highest point since April.
Normally, that would send traders into a frenzy, but this time? Crickets. They’ve already factored in the Fed’s cautious vibes.
The real kicker was December’s dot plot, which projected just two measly quarter-point cuts in 2025.
But Christopher Waller, one of the Fed’s governors, stepped in to ease the nerves from Paris, and explained that recent inflation spikes were mainly due to imputed prices like housing services, while observed prices for other goods are showing signs of cooling off.
In other words, it’s not as dire as it seems. Waller even hinted at supporting more rate cuts in 2025 if the economy stays on track.
Stock market unaffected?
While stocks were taking this news in stride, crypto had a bit of a rollercoaster ride, and Bitcoin dropped to $92,000 on Thursday after reaching $102,000 just days earlier.
Yet crypto fans are still optimistic, believing that better regulations this year will boost prices and help companies like Coinbase and Robinhood thrive.
Bitcoin’s wild swings aren’t new after all, but its momentum is hard to ignore, it’s up 3% this year after 120% gain last year.
The Fed claimed the economy is growing at a solid pace, but also noted that the labor market is easing and unemployment is inching up, though still low overall.
Inflation is getting closer to their 2% target but remains elevated, so they’re keeping a watchful eye on potential risks.
