The minutes from the Federal Reserve's January 27-28, 2026, Federal Open Market Committee (FOMC) meeting were released on February 18, revealing a deeply divided central bank and triggering immediate market reactions. The FOMC voted 10-2 to maintain the federal funds rate target range at 3.50–3.75%, with Governors Christopher Waller and Stephen Miran dissenting in favor of a 25 basis point cut.
The minutes highlighted a significant policy split. While several officials indicated that further rate cuts could be warranted if inflation declines as expected, most cautioned that disinflation could be slower than generally anticipated. Some policymakers even advocated for "two-sided" guidance, suggesting rates might need to rise if inflation remains stubbornly above the Fed's 2% target.
The committee also removed the phrase "increased downside risks to employment" from its statement, signaling a partial improvement in the perceived risks to the labor market. Recent data supports a cautiously optimistic outlook, with U.S. economic growth accelerating, inflation slowing—driven by falling energy costs—and the labor market showing signs of stabilization.
The market response was swift and pronounced. Bitcoin emerged as the biggest underperformer following the release, facing significant downward pressure. Conversely, the U.S. Dollar Index (DXY) and bonds rallied as the hawkish undertones in the minutes spurred safe-haven buying. Analysts attributed Bitcoin's weakness to a combination of risk-off sentiment and dollar strength.
Equity markets showed modest gains, with the Dow Jones up 0.24%, the S&P 500 up 0.59%, and the NASDAQ up 1.00%. The minutes also revealed that multiple Fed participants noted vulnerabilities in private credit and the broader financial system. Following a stronger-than-expected payroll report, market expectations for a rate cut in March have effectively been taken off the table, though expectations for cuts later in 2026 have risen.
