Crypto Prices Dip as Fed Minutes Reveal Lingering Inflation Fears and Policy Caution

The cryptocurrency market experienced a sharp, albeit brief, correction this week following the release of the U.S. Federal Reserve’s May meeting minutes. As investors digested the central bank’s cautious tone on inflation and economic growth, Bitcoin and Ethereum dropped by roughly 2%, while Solana and XRP declined by 4% during Tuesday evening trading.

Fed’s Message: Growing Caution Amid Economic Crosswinds

The minutes from the Federal Open Market Committee (FOMC) meeting, held on May 6–7, offered a sobering view of the U.S. economy. Policymakers expressed concern over the possibility of stagflation—a rare but challenging mix of rising inflation and elevated unemployment—that could corner the Fed into making tough policy decisions.

While the Fed chose to hold interest rates steady at 4.25% to 4.5%, it also flagged a series of risks weighing on the economy, including financial volatility and geopolitical tensions. A particular concern was the temporary delay—rather than cancellation—of proposed 145% tariffs on Chinese imports, introduced by the Trump campaign, which has fueled uncertainty about future trade policy.

Fed officials also highlighted recent spikes in bond yields and warned about the potential impact on the U.S. dollar’s global standing and the stability of Treasury markets. Meanwhile, Fed staff lowered their growth outlook, predicting a sustained rise in inflation throughout the year and a climb in unemployment above 4.6%, which exceeds the bank’s benchmark for full employment.

Crypto Market Reacts to Economic Uncertainty

The central bank’s wait-and-see approach led crypto traders to reassess their positions, resulting in a modest risk-off shift. Market participants scaled back exposure, causing total crypto market capitalization to decline, and funding rates to turn mixed—an indication of indecisive sentiment among derivatives traders.

The broader takeaway for investors is that the market is now factoring in a scenario of slower economic growth but sticky inflation, a combination that traditionally weighs on speculative assets like cryptocurrencies. Without a clear direction from the Fed, digital asset markets could remain volatile in the weeks ahead.

The next FOMC meeting, scheduled for June 17–18, may offer more clarity. Until then, traders and analysts will be closely watching incoming economic data for signs of whether inflation and unemployment will continue to drift further apart—an outcome that could shape interest rate policy and market sentiment moving forward.