US Federal Reserve Minutes Show More Rate Hikes Coming, Concern About Stablecoin Risks
Bitcoin and other cryptocurrencies had little to no reaction to the central bank release.
U.S. Federal Reserve governors anticipate announcing more interest rate increases in the coming months, but the pace of the hikes will likely slow if the inflation rate starts to come down, according to meeting minutes released Wednesday.
The minutes are from last month’s meeting of the Federal Open Market Committee (FOMC), which is the Fed’s monetary-policy panel, led by Chair Jerome Powell.
But more than interest rates came up during the meeting. The effect of digital assets, particularly stablecoins, on the nation's financial stability was also discussed, according to the minutes.
Bitcoin (BTC) and most other major digital-asset prices changed little following the release of the meeting minutes. The largest cryptocurrency by market capitalization was trading 0.4% higher in the 30 minutes after the release but was down about 1% over the past 24 hours. Bitcoin has declined for four consecutive days, after rallying last week.
The FOMC boosted the interest rate by a robust 75 basis points in July as part of its hawkish monetary campaign to tame inflation, which has hit a four-decade high. The committee, which meets regularly to set U.S. monetary policy, is widely expected to increase the rate by a similar amount at its September meeting.
However, according to the FOMC minutes, “As the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation.”
According to the minutes, the Fed will continue to hike interest rates until inflation lowers to 2%. “It likely would be appropriate to maintain that level for some time to ensure that inflation was firmly on a path back to 2%,” the minutes said.
The U.S. central bank has raised interest rates four times this year, including increments of 75 basis points – a historically large increase – at its last two meetings.
The minutes also show concern about crypto, in particular stablecoins and their threat to financial stability and creating bank runs.
“While the recent turmoil in digital asset markets had not spread to other asset classes, these participants saw digital assets’ rising importance and growing interconnectedness with other segments of the financial system as underscoring the need to establish a robust supervisory and regulatory framework for this industry that would appropriately limit potential systemic risks,” the minutes said.
Some FOMC members called for stronger oversight and regulation of certain crypto-related institutions.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.