Federal Reserve's July minutes set the tone: Is a September rate cut cooling off? Market shift, pressure on cryptocurrencies, and response strategies
In the early hours of today, the Federal Reserve's July monetary policy meeting minutes were released, far exceeding market expectations. Most committee members clearly indicated that current inflation risks have overshadowed concerns about the employment market, which directly suggests that the pace of Federal Reserve interest rate cuts may significantly slow down, more cautiously than previously anticipated by the market.
Three core highlights from the meeting minutes
1. Rare disagreement in nearly 30 years: At the July meeting, Federal Reserve governors Waller and Bowman both cast dissenting votes, marking the first time since 1993 that two governors opposed simultaneously. They believe the employment market is weakening, but most committee members still insist that 'inflation upside risks are more prominent'.
2. Tariff policies exacerbate inflation anxiety: Committee members emphasized that the tariff policies of the Trump administration may lead to inflation remaining above the 2% target for an extended period, further increasing the risk of inflation expectations 'de-anchoring'. This means the Federal Reserve may need to maintain high interest rates for longer periods to suppress inflation.
3. The probability of a rate cut in September has plummeted: After the release of the minutes, market expectations for a September rate cut fell from over 90% to below 80%, forcing investors to reassess the future direction of the Federal Reserve's monetary policy.
Powell's speech on Friday becomes a 'key variable'
Currently, all market attention is focused on Federal Reserve Chairman Powell—he will deliver a speech at the Jackson Hole Global Central Bank Symposium this Friday, marking his last appearance in this role at this event. The market is eager to capture three major signals from this.
- Will interest rate cuts officially start in September?
- What is the Federal Reserve's specific plan for the future path of interest rates?
- How to balance the dual goals of 'combating inflation' and 'stabilizing employment'?
Looking back at history, Powell has repeatedly released key information at this occasion: in 2018, he emphasized the need to balance dual risks, and in 2022, he clearly expressed a firm determination to combat inflation. This speech may directly reshape the Federal Reserve's policy framework.
Triple impact on the cryptocurrency market
1. Short-term pressure: When the Federal Reserve maintains a 'hawkish' stance, risk assets typically get impacted, and cryptocurrencies are no exception. If high interest rates persist for an extended period, high-valued assets, including some cryptocurrencies, may face valuation correction pressure.
2. Liquidity expectations remain core: Although short-term policies are hawkish, the market still generally expects the Federal Reserve to eventually shift toward interest rate cuts. Once rate cuts start, the $7.2 trillion cash held in U.S. money market funds is expected to partially flow into risk assets, and the cryptocurrency market may also benefit from this.
3. 'Altcoin season' may be delayed but will not be absent: Institutions such as Coinbase believe that expectations for Federal Reserve interest rate cuts remain key to driving 'altcoin season'. Although this meeting's minutes are hawkish, if Powell's tone softens in his speech on Friday, there is still a chance for altcoin trends in September.
Investor response strategies
- Short-term: Maintain a cautious attitude, closely monitor the wording details of Powell's speech on Friday, avoid high-leverage operations, and control risk exposure.
- Mid-term: Focus on tracking inflation data and employment market performance; these two indicators are core bases for determining the Federal Reserve's policy direction.
- Long-term: It is advisable to accumulate quality crypto assets at low points. A shift in the Federal Reserve's policy is just a matter of time; once liquidity is released, the cryptocurrency market is expected to welcome a new round of trends.
Summary
The Federal Reserve's July meeting minutes clearly convey a signal: combating inflation remains the current top priority. The market needs to adjust its expectations for the pace of interest rate cuts, but this does not mean that an easing cycle will not come.
It is worth considering: In the cryptocurrency market, excess profits often arise during periods of market panic. When the next wave of panic spreads, will you choose to follow the crowd out, or strategically position yourself against the trend?
