The January 27 to 28, 2026, minutes from the Federal Open Market Committee offer a clear message. The Federal Reserve is in no rush to cut rates again.
After lowering the federal funds rate by 75 basis points in late 2025, policymakers chose to hold the target range at 3.5% to 3.75%. On the surface, that sounds neutral.
Yet beneath that decision sits a more nuanced debate about inflation, labour market resilience, and the possibility that rate hikes could return if price pressures refuse to fade. For crypto markets, this distinction between dovish patience and hawkish caution matters more than ever.
Inflation Is Easing, But Not Enough for Comfort
The Fed’s dual mandate remains unchanged: maximum employment and 2% inflation over the longer run. According to the minutes, inflation has eased significantly from its 2022 highs, but it is still somewhat elevated relative to that 2% objective.
Core PCE inflation stood at 2.8% in November and was estimated at 3.0% in December. CPI inflation was 2.7% year on year in December. These are improvements, yet not decisive victories.
Participants acknowledged that disinflation in housing services has continued, which is encouraging.
However, core goods inflation has picked up, in part due to tariffs. Several policymakers cautioned that progress toward the 2% target might be slower and more uneven than previously expected.
More importantly, some indicated that upward adjustments to the policy rate could be appropriate if inflation remains above target.
That line is crucial. It does not mean a rate hike is imminent. Markets currently price a high probability that rates will remain unchanged at the March meeting.
However, the Fed is deliberately keeping the option of tightening on the table. This shifts the tone from purely dovish to conditionally hawkish.
At the same time, almost all participants agreed that monetary policy is not on a preset course. Further cuts could still be appropriate if inflation declines in line with expectations.
In other words, the Fed is data-dependent. If inflation resumes its downward path convincingly, easing can return. If not, policy could remain restrictive for longer, or even tighten.
For crypto markets, the implication is straightforward. A dovish Fed, signalling rate cuts and abundant liquidity, tends to support risk assets.
A hawkish Fed, emphasising restraint and the possibility of higher rates, does the opposite. Liquidity is the oxygen of speculative markets. When it expands, crypto breathes easier. When it contracts, volatility increases and valuations compress.
A Resilient Economy Complicates the Liquidity Outlook
The second major theme in the minutes is economic resilience. Real GDP expanded in 2025, albeit slightly below its 2024 pace. Consumer spending remained solid, supported by household wealth.
Business investment, especially in technology and AI, continued to be robust.
Even though payroll growth was low and the average monthly change in payrolls turned negative in the fourth quarter due to temporary factors, the unemployment rate held steady at 4.4%.
Most participants observed signs of labour market stabilisation after a period of cooling. Layoffs remain low.
Hiring is cautious but not collapsing. This backdrop reduces the urgency for immediate rate cuts. If the economy were deteriorating sharply, the Fed would likely pivot more decisively toward easing. Instead, policymakers see a balanced picture.
Financial markets reflect this equilibrium. Treasury yields were little changed, though longer term yields rose slightly, steepening the curve.
Equity markets advanced modestly, with smaller and cyclical firms outperforming large technology companies. Credit spreads remain low by historical standards.
Funding markets are stable, with repo pressures moderating and reserves projected to fluctuate around $3 trillion. In short, financial conditions are not signalling distress. That gives the Fed room to wait.
For crypto, this creates a nuanced environment. On one hand, stable financial conditions and moderate growth reduce systemic risk. That is constructive.
On the other hand, without aggressive rate cuts, the wave of excess liquidity that typically fuels strong crypto rallies may not materialise immediately.
Historically, crypto has reacted more strongly to liquidity conditions than to rate cuts alone. When real yields decline, the dollar weakens, and central bank balance sheets expand, digital assets tend to perform better.
The January minutes show no immediate return to quantitative easing or aggressive stimulus. The Fed continues to roll over Treasury holdings, maintain standing repo operations, and keep reserves ample, but not excessively loose.
The presence of a hawkish contingent within the Committee further tempers enthusiasm. Two members voted against holding rates steady and preferred a 25 basis point cut.
Yet several others explicitly supported a two sided risk description, meaning hikes remain possible. That balance keeps markets cautious.
For crypto investors, the message is clear. A shift toward a more dovish stance, marked by clear evidence of disinflation and renewed rate cuts, would likely be supportive.
Conversely, if inflation proves sticky and the Fed signals renewed tightening, liquidity conditions could tighten, weighing on high risk assets.
Conclusion
The January 2026 FOMC minutes do not signal an immediate rate hike, but they do reveal a central bank unwilling to declare victory on inflation. Policy remains steady at 3.5% to 3.75%, with future moves firmly tied to incoming data. For crypto, the equation remains unchanged.
More dovish policy means more liquidity and stronger tailwinds. A more hawkish stance implies tighter financial conditions and increased pressure. As always, the direction of liquidity will likely shape the next major move in digital asset markets.