Bitcoin News Today: The Fed’s Tariff Dilemma: A Clash of Inflation Fears and Rate Cut Urges

The Federal Reserve’s highly anticipated FOMC meeting minutes, released on August 20, 2025, provided insight into the central bank’s deliberations on interest rates, inflation, and economic growth. The minutes revealed a Fed still grappling with the dual mandates of controlling inflation and sustaining employment, with mixed signals from the economy. The Federal Open Market Committee (FOMC) left the federal funds rate unchanged in the 4.25%-4.50% range, as it has in its past five meetings. A key point of discussion was the impact of recent trade policies, including tariffs, which participants said were beginning to show up in goods price inflation but whose broader effects on the economy and inflation remained uncertain [1].

Participants emphasized that the effects of higher tariffs on inflation could take time to fully materialize, with many acknowledging the delayed pass-through of input costs into consumer prices and the role of business strategies such as cost efficiency and supplier renegotiations in mitigating price pressures [2]. The FOMC staff’s economic projections painted a cautiously optimistic picture, with real GDP growth expected to remain subdued in the near term. However, the staff anticipated a modest easing of inflation in 2027, provided the effects of tariffs were contained. Uncertainty, particularly around the duration and magnitude of tariff impacts, continued to loom large over the economic outlook [1].

Financial market conditions remained a focal point of the minutes. Equity markets showed resilience, with broad indices rising and credit spreads tightening, signaling improved risk appetite. However, vulnerabilities in asset valuations were noted, with valuations on equities and high-yield bonds reaching elevated levels. The FOMC also monitored the evolving role of payment stablecoins, which were expected to gain traction following the passage of the GENIUS Act. While some participants highlighted the potential for stablecoins to improve payment efficiency, others raised concerns about their implications for financial stability and monetary policy implementation [1].

The minutes revealed a divided FOMC, with two dissenting votes in favor of a 25-basis-point rate cut—Governors Michelle W. Bowman and Christopher J. Waller. They argued that inflation, excluding the effects of tariffs, was nearing the Fed’s 2% target and that the labor market, while still strong, showed signs of softening. The rest of the committee, by a 9-2 margin, supported keeping the federal funds rate unchanged. The split marked the first dual dissent in favor of a rate cut since the FOMC meetings began in 1993 [2].

In the wake of the minutes, financial markets remained cautious, with the cryptocurrency market reacting to the uncertainty. Bitcoin, for instance, fell to a one-week low of $115,000 amid speculation about the Fed’s potential rate cut in September. The total crypto market cap dropped by 0.75% as investors waited for further guidance, particularly from Fed Chair Jerome Powell’s speech at the Jackson Hole symposium on August 22. Powell’s address is expected to carry significant weight, with analysts noting that his tone could either bolster or undermine market expectations of rate easing [5].

The broader financial landscape also showed signs of volatility. The EUR/USD pair consolidated near 1.1640 as traders awaited Powell’s speech and the outcome of peace talks between Ukraine and Russia. Meanwhile, U.S. inflation data, particularly the Producer Price Index (PPI), had tempered earlier optimism from the Consumer Price Index (CPI), leading to mixed expectations about the scale of any potential rate cut in September. The CME FedWatch tool indicated a 100% probability of a rate cut, while Polymarket showed 73.6% odds, underscoring the high stakes of the upcoming decision [6].

The FOMC minutes and Powell’s Jackson Hole speech are expected to serve as pivotal signals for both traditional and digital asset markets. While the Fed remains cautious in its policy stance, the minutes suggest that the central bank is closely monitoring the evolving economic landscape. The interplay between inflationary pressures from tariffs, labor market dynamics, and global economic conditions will continue to shape the Fed’s path forward, with the September meeting likely to be a critical juncture in the current monetary policy cycle [1].

Source: [1] The Fed - Monetary Policy: (https://www.federalreserve.gov/monetarypolicy/fomcminutes20250730.htm) [2] FOMC meeting minutes:It would take time to get clarity on ... (https://investinglive.com/centralbank/fomc-meeting-minutesit-would-take-time-to-get-clarity-on-tariffsupside-risk-to-inflation-20250820/) [3] Crypto Market Dips as Traders Await FOMC Minutes and ... (https://coinnews.com/news/cryptocurrency/crypto-market-dips-as-traders-await-fomc-minutes-and-powells-jackson-hole-address) [4] Bitcoin price edges higher 0.13% as investors await Fed ... (https://tradersunion.com/news/cryptocurrency-news/show/445188-bitcoin-steady-amid/) [5] Fed's September Rate Cut Next? FOMC Minutes and ... (https://coingape.com/trending/feds-september-rate-cut-next-fomc-minutes-and-powell-speech-this-week-to-decide/) [6] Fed chair Powell to speak at Jackson Hole amid rate cut ... (https://www.foxbusiness.com/economy/powell-faces-economic-crossroads-jackson-hole-speech-fed-chair-tenure-nears-end) [7] EUR/USD steadies below 1.1650 as markets await ... (https://www.mitrade.com/insights/news/live-news/article-1-1052302-20250820) [8] What to Expect from Fed Chair Powell's Speech on Friday (https://www.investopedia.com/what-to-expect-from-fed-chair-powell-s-big-speech-friday-11792908)