Policymakers at the United States Federal Reserve examined the prospect of raising interest rates last month, according to newly published minutes from the January policy meeting.

The Federal Open Market Committee’s late-January record, released on Wednesday, showed that some officials considered a rate increase in response to persistently elevated inflation. Several participants noted they would support “the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels,” the minutes stated.

At that meeting, officials chose to leave rates unchanged at 3.5% to 3.75%, following three cuts toward the end of 2025 that lowered borrowing costs from 4.5% to current levels.

If implemented, such a move would mark the first rate hike since July 2023. Market expectations remain largely unchanged, however, with CME futures pricing indicating a 94% likelihood that rates will stay steady at the next Fed meeting on March 18. The central bank’s rate policy continues to revolve around its dual mandate of controlling inflation and supporting the labor market.

Inflation uncertainty shapes policy outlook

The minutes also highlighted a notable hawkish group of policymakers who remain reluctant to endorse further easing. Some participants argued that it would likely be appropriate to “hold the policy rate steady for some time” in order to better evaluate incoming economic data. Others suggested that “additional policy easing may not be warranted until there was a clear indication that the progress of disinflation was firmly back on track.”

Most officials warned that the path toward the 2% inflation target “might be slower and more uneven than generally expected,” acknowledging a meaningful risk that inflation could remain above target for longer. If inflation moderates in line with projections, rate cuts “would likely be appropriate,” the minutes noted.

Recent data from the Bureau of Labor Statistics shows US Consumer Price Index inflation at 2.4%, after a 0.2% monthly increase in January, leaving price growth still above the Fed’s long-term objective.

Implications for risk assets

Rising interest rates are typically negative for higher-risk assets such as cryptocurrencies, as safer instruments like Treasury bonds or cash tend to offer more attractive risk-adjusted returns in a higher-rate environment.

Tighter monetary policy also raises borrowing costs, which can dampen speculative activity, reduce leverage and slow venture capital flows.

With cryptocurrency market sentiment already weak, a more hawkish Federal Reserve stance could add further pressure on digital asset valuations.

Sources:

https://cointelegraph.com/news/fed-sees-possibility-of-upward-adjustments-to-rates-if-inflation-remains-above-target-levels

https://www.federalreserve.gov/newsevents/pressreleases/monetary20260218a.htm

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

https://tradingeconomics.com/united-states/interest-rate

https://www.bls.gov/cpi/