Federal Reserve Meeting Minutes Reveal Deep Divisions, Uncertain Path for Rate Cuts in 2026

The Federal Reserve’s December 31 release of the December monetary policy meeting minutes showed significant internal disagreements within the Federal Open Market Committee (FOMC) regarding whether to cut interest rates. Ultimately, with a 9 to 3 vote, the committee decided to lower rates by 25 basis points again, bringing the federal funds rate target range down to 3.5% to 3.75%. This is the most opposed decision since 2019.

The minutes reveal that although most officials believe that further rate cuts may be appropriate if inflation declines as expected, some officials hold strong reservations about the pace of future easing, even stating that this rate cut decision was “very balanced,” and could have supported holding rates steady. On the market side, according to CME’s “FedWatch” tool, as of December 31, traders assign an 85.1% probability that the Fed will keep rates unchanged at the January 2026 meeting, indicating a cautious outlook for subsequent policy shifts. This contradictory set of minutes casts a shadow of uncertainty over the 2026 global macro markets, especially for risk assets highly sensitive to cryptocurrencies like Bitcoin and Ethereum.

Deep Divisions Behind the 9 to 3 Vote: An “Extremely Balanced” Dilemma

The Federal Reserve’s monetary policy meeting held on December 9-10, 2025, may have been more tense than market perceptions based on the results. The latest minutes depict a scene of fierce internal debate among decision-makers. In the end, the FOMC approved a 25 basis point rate cut with a 9-3 vote, marking the largest internal policy disagreement since 2019. This rare voting outcome acts like a stone thrown into a calm lake, with ripples directly reflecting the sharply differing views among policymakers on the economic outlook.

The core contradiction in the minutes lies in the delicate balance officials seek between supporting the labor market and containing inflation risks. The minutes state: “Most participants judged that if inflation declines as expected over time, further easing by lowering the federal funds rate range may be appropriate.” This provides a theoretical justification for the rate cut, implying it was a “preemptive” or “aligned with inflation trends” easing. However, immediately following, concerns are revealed: “Some participants suggested that, based on their economic outlook, it might be appropriate to hold the target range steady for a period after this meeting’s rate cut.” This cautious, “wait-and-see” stance sharply contrasts with those advocating continued easing.

More subtly, the minutes even indicate that, even within the easing camp, consensus is not ironclad. “Some supporters of rate reductions at this meeting noted that the decision was ‘very balanced,’ or that they could have supported keeping the target range unchanged.” Such language is rare, suggesting that the December rate cut was nearly on the edge of a “swing state,” where slight changes in economic data or individual officials’ views could lead to entirely different outcomes. This deep uncertainty complicates interpretations of the Fed’s future policy path and suggests that each 2026 meeting could become a battleground for bulls and bears.

Dot Plot Clarity vs. Market Expectations: A Cold-Warm Divide

Beyond the contentious vote, another focus of the December meeting was the release of the Summary of Economic Projections (SEP), especially the median of officials’ interest rate forecasts depicted in the so-called “dot plot.” The chart, jointly drawn by 19 officials (including 12 voting members), shows a projected rate path that indicates one more rate cut in 2026, followed by another in 2027. If realized, this path would gradually bring the federal funds rate close to 3% within two years. Within the Fed’s framework, 3% is often considered the “neutral rate,” where monetary policy is neither stimulative nor restrictive.

However, market traders seem skeptical of this “official path.” According to CME’s “FedWatch” tool data as of December 31, the implied probabilities in the federal funds futures market show a gap with the “patient and accommodative” tone of the dot plot. The data indicates that the market assigns a 45.2% chance that the Fed will cut rates by 25 basis points at the March 2026 meeting, and a 48.3% chance of holding rates steady, with the latter even slightly favored. This suggests traders are betting that the Fed will hold steady through the next two meetings rather than start a new easing cycle immediately. The subtle divergence between market expectations and official guidance reflects the internal disagreements revealed in the minutes, which the market has keenly picked up.

December Meeting “Dot Plot” Key Expectations

Long-term policy rate median: near 3% (neutral rate level)

2026 forecast: one additional cut

2027 forecast: one additional cut

Core concerns of dissenters: inflation stagnating in 2025, requiring more confidence that inflation can sustainably reach 2%

The dissenting officials explicitly express their worries in the minutes. They note that progress toward the 2% inflation target has stalled in 2025, or that more confidence is needed that inflation is being persistently pushed down to the target. Additionally, officials discussed the impact of tariffs implemented during former President Trump’s administration, generally viewing this as a temporary effect likely to diminish by 2026. These fragments form a hawkish narrative: persistent inflation resilience and external uncertainties necessitate extreme caution with easing policies to avoid repeating past mistakes.

Economic Data Fog and the Policy Dilemma at the Start of 2026

The deep divisions within the Fed stem from the conflicting signals in the economic outlook, akin to navigating through fog. Since the December meeting, economic data releases have failed to clarify the picture. The labor market shows a “weak but not collapsing” state: hiring remains slow, but large-scale layoffs are absent. Inflation pressures are easing gradually, but key indicators are still far from the Fed’s 2% target, with a slow and uneven decline.

Meanwhile, the overall macroeconomic framework appears resilient. Q3 2025 GDP growth hit 4.3% annualized, well above market expectations and 0.5 percentage points higher than the strong Q2. This growth resilience might support the view of “maintaining high rates longer.” However, all data faces a major caveat: due to the previous government shutdown, many agencies are still compiling and revising economic statistics from that period, meaning current “latest” reports may lack timeliness and completeness. Even official data, when interpreted, requires caution, as gaps could lead to misjudgments.

This data uncertainty directly influences policy expectations. Markets generally expect the Fed to keep rates steady in upcoming meetings, as policymakers need time to assess the noisy and potentially distorted data flow. During the holiday period, Fed officials largely remained silent, with few public comments showing cautious attitudes toward early 2026 economic conditions. Moreover, the composition of the committee is about to change, with four regional Fed presidents rotating into voting seats. Notably, Cleveland Fed President Beth Hammack has publicly opposed further rate cuts and even questioned previous easing. These new voting members could further intensify internal debates, making the rate path forecast for 2026 even more challenging.

The 2026 Policy Shift and Its Macro Link to Crypto Markets

For Bitcoin, Ethereum, and the entire crypto market, this uncertain Fed meeting minutes are as significant as any blockchain upgrade news. Traditional macro monetary policy, especially the dollar’s interest rate and liquidity cycle, remains one of the most influential external factors driving large-scale crypto market movements. The internal debate within the Fed on “fighting inflation” versus “preventing recession” essentially determines the degree of U.S. dollar liquidity, which directly impacts risk asset valuations.

Historically, crypto markets tend to rally strongly at the end of rate hike cycles or the start of rate cuts, as markets pre-price the expectation of easing liquidity. However, the complex “hesitation” revealed in this minutes suggests that the path to such easing may be more tortuous and slower than before. If inflation data again shows volatility, the Fed might even signal a more hawkish stance, which could put short-term pressure on major crypto assets. In macro traders’ eyes, Bitcoin and Ethereum prices are not just decentralized network value carriers but also digital barometers of global liquidity tightness.

Therefore, crypto investors should pay close attention to traditional economic data releases—such as US CPI, non-farm payrolls, and GDP figures in 2026—as these will influence Fed expectations and could trigger sharp crypto market swings. Futures and options volumes linked to macro indicators on major exchanges may increase significantly, indicating active hedging against policy uncertainty. This macro-crypto linkage is expected to strengthen in 2026.

Subtle Changes in Liquidity Operations: Restarting Quantitative Easing and Market Impact

Beyond the rate decision, another aspect often overlooked by retail investors but directly affecting market liquidity is the committee’s decision to restart bond purchases. According to the new plan, the Fed will begin buying short-term Treasury bills to ease short-term funding pressures. The central bank will purchase about $40 billion worth of T-bills monthly, maintaining this scale for several months before gradually tapering. This operation is widely understood as a form of “quasi-QE,” even if the Fed avoids that term.

The minutes state that, without restarting this purchase program, reserve levels could fall significantly below the “adequate” reserve regime set by the Fed. Previously, the Fed’s balance sheet reduction efforts had shrunk assets by about $2.3 trillion, down to $6.6 trillion. Restarting short-term debt purchases effectively injects liquidity into the financial system, ensuring smooth operation. While different in scale and purpose from crisis-era large asset purchases, its impact on market psychology and actual liquidity should not be underestimated.

For crypto markets, this underlying liquidity “replenishment” provides an indirect but important support. A more accommodative overall liquidity environment in traditional finance increases the motivation for funds to seek high-yield, high-growth assets like cryptocurrencies. History shows that during periods of ample liquidity, institutions and risk-tolerant investors are more attracted to assets like Bitcoin. Therefore, the Fed’s management of both the “price” (interest rates) and the “quantity” (balance sheet size) of assets forms another hidden channel influencing crypto prices. Monitoring changes in the Fed’s balance sheet may become a key task for macro crypto analysts in 2026.

Macro Strategies for Crypto Investors in 2026

Given the complex and divided outlook of the Fed’s policy, how should crypto investors craft their strategies? First, recognizing the increasing importance of “narrative trading” is crucial. In choppy markets lacking clear trends, market sentiment around themes like “Fed pivot,” “soft/hard landing,” or “resurgence of inflation” can frequently drive asset prices. This makes swing trading more challenging but also opens opportunities for contrarian trades based on narrative reversals.

Second, risk management must be prioritized. During periods of high policy uncertainty, volatility tends to rise. Investors should consider using more conservative leverage and avoid overexposure in a single direction. Additionally, utilizing Bitcoin and Ethereum options to hedge macro “black swan” risks—such as buying out-of-the-money puts—can help protect against sudden hawkish signals triggering sharp declines.

Finally, maintaining confidence in long-term trends is essential. Regardless of how turbulent the policy cycle becomes, the overarching goal is to smooth economic fluctuations. The longer-term macro trend of global digitalization, Bitcoin’s narrative as digital gold, and Ethereum’s role as a decentralized computing platform are unlikely to change due to short-term rate fluctuations. For dollar-cost averaging or long-term holders, periods of macro fog may present strategic opportunities to accumulate core assets at relatively low prices. Looking beyond short-term rate disputes and focusing on the fundamental technological and societal transformations driven by blockchain may be the most reliable compass through the macro uncertainties of 2026.