The Fed reiterates that it will raise interest rates and shrink its balance sheet "as soon as possible", the market reaction is flat, and Bitcoin bulls remain on the sidelines

On Wednesday afternoon ET, the Federal Reserve released the minutes of its January 25-26 meeting. At the meeting, officials discussed plans to raise interest rates and reduce the central bank's balance sheet, the minutes showed.

Some officials at the meeting expressed concerns about financial stability, saying easy monetary policy could pose significant risks, interest rate hikes could come soon and exits from bond portfolios could be "aggressive". Despite the seemingly tough tone, the stock market and crypto markets regained their "lost ground" following the release of the minutes.

The Fed reiterates that it will raise interest rates and shrink its balance sheet "as soon as possible", the market reaction is flat, and Bitcoin bulls remain on the sidelines

Investor sentiment appeared to have eased as the minutes did not suggest the Fed was moving faster than expected in raising interest rates. Bittui terminal data shows that in the opening hours of US stocks on Wednesday, as investors waited for clues about the Fed’s plans for inflation, reduction and interest rate hikes, Bitcoin briefly fell to $43,071, rebounded slightly as of press time, and the price recovered to around $43,767. Daily volatility tends to moderate. The S&P 500 ended flat after a choppy session on the day.

The Federal Open Market Committee decided not to raise interest rates earlier after the meeting, but strongly signaled a rate hike as soon as March.

"The market is rightly interpreting them as dovish relative to expectations, and frankly I would call them 'anticlimactic,'" Simona Mocuta, chief economist at State Street Global Advisors, told CNBC.

Crypto markets have been in consolidation over the past few weeks as inflation soars and hawkish remarks from some Fed officials, notably St. Louis Fed President Bullard, have traders expecting seven rate hikes this year of 0.25 percentage points each in March There is a 74% chance of a 0.25 percentage point hike. After the minutes of the meeting were released, the market price has retreated, and the probability of the Fed raising interest rates by 1.75 percentage points has dropped to 50%.

Mocuta believes: "There's been so much hype lately, and I think everyone is ready to play a very tough tone in the minutes that are more like, 'Of course we'll do this, but we'll walk before we run. "Four rate hikes by the Fed seem to be enough."

Speed up the shrinking table

In addition, the committee laid out procedures on how to begin shrinking its balance sheet, with the minutes stating: "Participants observed that a significant reduction in the size of the balance sheet may be appropriate given the Fed's current large securities holdings."

Since the meeting, new inflation data showed U.S. prices rose at their fastest pace in 40 years. The Fed's goal is to average inflation around 2%, and the minutes showed that inflation dominated discussions during the meeting, the word was mentioned 73 times in the abstract, and members said price increases were stronger and stronger than they had expected. lasting.

"Participants acknowledged that rising inflation is a burden on American households, especially those least able to pay higher prices for basic goods and services," the minutes said. While no decisions were made on the specifics of the balance sheet reduction at the meeting, participants agreed to continue discussions at an upcoming meeting.

The conference also briefly discussed cryptocurrencies and stablecoins. Fed Officials Worried About Significant Growth in Crypto Markets: “Some attendees argued that