In late May 2026, the Federal Reserve released the minutes of the April FOMC meeting, and the term "rate hike," which had gradually been forgotten by the market, was rewritten into the official narrative. The minutes indicated that a majority of attendees explicitly stated that if inflation stubbornly remained above the 2% target level, monetary policy would not only need to maintain its tightening stance but could also require "further tightening," with rate hikes directly listed as an option. Compared to the discussions over the past two years surrounding "when to cut rates," the discussion about rate cuts in this minutes clearly cooled, with only a few officials still insisting that cuts could be considered once inflation significantly declined, while the entire discussion framework shifted from "when will easing come" to "whether to tighten again." The staff's baseline outlook for the economy also showed a bias against risk assets—economic growth was described as "robust/solid," and the labor market had become more stable and optimistic compared to March. Against this backdrop, most policymakers tended to remove the "easing bias" from policy communications, providing narrative support for "higher rates lasting longer." The market and analysis institutions generally interpreted these minutes as a significant hawkish turn: rate cut expectations were pushed further into the future, "higher for longer" became the new baseline scenario, and if inflation were to stubbornly persist again, the likelihood of the Fed raising rates again was no longer a theoretical exercise, but a genuine option included in the minutes, pressing down a new valuation ceiling on global risk assets and proving particularly detrimental to the crypto market, which highly depends on liquidity and risk appetite.

From When to Cut Rates to Whether to Raise Rates: A Narrative Reversal

Over the past two years, the main thread of the Fed's external communications was repeatedly discussing "when to cut rates" in the context of inflation declining from high levels but still above target: how quickly inflation would return to target, when the first rate cut would occur, and how many cuts could happen throughout the year. This script assumed that the next move for rates would be downward, just at different paces, with a clear "easing bias" reflected in policy statements. Until early 2026, through March, economic and labor market data showed stronger resilience than expected, and inflation remained above the 2% target, gradually squeezing the space for rapid rate cuts and laying the groundwork for a narrative reversal.

The minutes of the April FOMC meeting formally inscribed this reversal into text: a majority of decision-makers leaned towards removing the "easing bias" from the policy statement, while discussions about rate hikes or further tightening became more prominent than before. The policy stance shifted from "more likely to ease in the future" back to neutral, even slightly leaning towards tightening. For the market, this was not just a change in tone, but a rewriting of the basis for pricing the path of interest rates—from calculating when the first cut might occur to reassessing the risk premium of "whether there might be another hike." The minutes also downplayed the presence of rate cuts, with only a few officials still believing that cuts might be appropriate in the future, and the condition firmly pinned to inflation "clearly and persistently declining towards 2%." Within this narrative framework, "higher for longer" became the new default scenario, while the real hedge needed was against the tail risk of the Fed being forced to restart rate hikes if inflation once again became stubborn.

Rare 8-4 Disagreement: Hawks and Doves Collide under the Shadow of Inflation

If the hawkish wording could still be interpreted as "preventive deterrence," then the disclosed voting table from a single source was particularly straightforward: the April rate decision passed with 8 votes in favor and 4 against, with the number of opposing votes being rare in recent FOMC records. This indicates that within the same meeting where the "question of whether another hike is needed" was brought to the table, there was no consensus among Fed members on what the next step should be; even the compromise of "maintaining the status quo while verbally shifting towards hawkish" could not gain overwhelming support.

The majority chose a path of "high wait and see": in the context of inflation still above the 2% target, but with economic and labor market performance described as "robust/solid," rates would be kept unchanged for now, while clearly stating in the minutes that if inflation continues to remain stubbornly above the target, preparations for further tightening or even rate hikes would be necessary. This thinking emphasizes retaining policy flexibility, seeking a fragile balance between inflation, economic resilience, and external risks such as the Middle East situation. Opposing this was 3 of the 4 dissenting votes—one source indicated that these three FOMC members advocated for a quicker removal of the "easing bias," not satisfied with merely obscuring the prospects for rate cuts in wording but rather wanting to shift the stance more clearly towards tightening and have the market reprice for possible accelerated tightening. The remaining opposing vote reminded the market that even within the dissenting camp, there was no consensus on how fast or aggressively to shift towards a hawkish stance. The real divide lay in the line between "confirm tightening as soon as possible" and "getting a clearer sense of the inflation path before acting." From the 8-4 split vote to the public discussion of rate hike options, this internal collision between hawks and doves at the Fed has itself become a new source of uncertainty in market pricing.

The Iran War and Oil Price Risks Push Inflation into the Unknown

The fissure exposed by internal voting was quickly widened by external realities. The minutes stated very plainly: under the premise that inflation remains "above the 2% target," the situation in the Middle East, especially the uncertainty brought about by the Iran war, was viewed by a majority of attendees as a new upward source of inflation. This uncertainty not only means that oil prices may cyclically rise but also indicates that geopolitical risks could again push up commodity prices at any time, preventing what was originally thought to be a gradual decline in prices from staying above the target once more. The consensus conveyed in the minutes was that under such circumstances, the currently tight monetary policy stance would likely need to be maintained for longer than previously expected, rather than hastily fulfilling the "rate cut story" that the market had repeatedly bet on over the past two years.

At the mechanistic level, some officials pointed out more details: geopolitical conflicts driving up prices of crude oil and other energy sources first raise transportation and manufacturing costs, which are then passed on to a broader range of consumer goods through price hikes by businesses; tariff increases imposed an additional "tax" on the import side, directly embedding rising input costs into terminal price lists. If businesses and households begin to accept the reality that "costs will always be passed on to consumers," the negotiations around prices and wages will all be anchored in higher inflation expectations. Inflation will no longer be just a transient shock but could potentially solidify in more extensive areas. The minutes repeatedly returned to this invisible dividing line: facing a potential "stubbornly above 2%" inflation path driven by external shocks like the Iran war, the Fed must neither allow expectations to become unanchored again nor over-tighten in order to "prove anti-inflation determination," thereby imposing an unnecessary second blow on the real economy already bearing geopolitical shocks.

Robust Growth and Strong Employment: Where the Hawks Draw Their Confidence

From the wording details of the April minutes, one can clearly see the subtle shift in the staff's mindset. Compared to the cautious statements in March, this time the baseline outlook for the U.S. economy was explicitly stated as "slightly stronger," with economic growth directly defined as "robust/solid." This is not merely a change of adjectives, but a rearrangement of the risk assessment framework: in their model, the U.S. economy is no longer a fragile entity "just managing to survive high rates," but a resilient body capable of continuing to move forward in a tighter environment, thus providing a logical starting point for "rates higher for longer" and even re-discussing rate hikes.

The description of the labor market also underwent a directional change. The minutes stated that compared to March, the labor market was "more stable and optimistic," with some previous signs of weakness deemed to have eased. For the Fed, which bears the dual mandate of "maximum employment" and "price stability," this represents a cushion they can temporarily rely on: a strong job market allows for maintaining the current tightening stance and even considering further tightening without immediate concern for uncontrolled rises in the unemployment rate. However, this cushion is not boundless. The macro logic is clear—if high rates are pushed too high and maintained for too long, business investment and hiring will ultimately slow, and today’s strong employment supporting the hawkish stance may just become the first litmus test of whether the Fed has "tightened too much" in one or two decision cycles.

The Next Step for the Crypto Market: The Test of Long-Term High Rates

From this minutes onward, the market has to price "higher rates lasting longer, even restarting rate hikes" as a serious scenario. The higher the risk-free rates rise, the more justification there is for money to stay in low-risk assets like government bonds, with high-volatility crypto assets marked by a higher discount rate in pricing models. Historically, once expectations shift from easing and rate cuts to "higher for longer," valuation repricing often erupts first in this sector. Going forward, the crypto market truly needs to keep an eye on a few key dashboards: first, whether continuous inflation data will deviate again from the 2% target; second, whether the labor market will transition from "solid" to a clear downturn; third, whether the next FOMC will further incorporate the language of "needing to tighten or even raise rates" into the official statement after the minutes—this will determine whether the market bets on "just extending high rates" or starts pricing in "another rate hike" itself. In this period of high monetary policy uncertainty, narratives about halving, ETF, and other internal matters have not disappeared, but are now engaged in a tug-of-war with rate expectations: during macro panic, they can only cushion emotions on the margins; during macro stabilization, they can be quickly amplified as reasons to enter. The trajectory of the crypto market in the next phase will depend on which of these two forces causes the other to surrender first, and the rhythm of this victory or defeat is largely inscribed in every subsequent inflation and employment data, as well as the Fed's public statements.

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