The Federal Reserve released minutes from its June 16-17 meeting on July 8, revealing a divided committee that unanimously held interest rates steady at 3.50% to 3.75% while flagging inflation risks tied to artificial intelligence spending, tariffs, and Middle East energy costs. The meeting marked Chair Kevin Warsh's first since taking over the Fed, with all 12 voting members backing the hold despite internal disagreement over whether a rate increase is still needed. Officials cited persistent inflation pressures, with core inflation running at 3.3% in April and estimated near 3.4% in May, well above the Fed's 2% target, while nine of 19 officials projected at least one rate hike before the end of 2026.
Fed Officials Split Over Rate Hike Justification
A few participants argued a rate increase was justified at the June meeting but ultimately supported holding steady, according to the minutes. Most officials cited persistent inflation risk from tariffs, Middle East energy costs, and AI-driven demand for tech, data centers, and electricity. Nine of 19 officials penciled in at least one rate hike before the end of 2026, a reversal from earlier projections that showed no hikes at all. Warsh did not submit a projection. At his post-meeting press conference, Warsh described the internal debate in blunt terms: "We had a good family fight on it for a couple of days, and we ended up, I think, in a better place."
AI Infrastructure Spending Drives Inflation Forecast Revisions
Fed staff raised inflation forecasts for 2026 and 2027, citing tariff pass-through, Middle East supply shocks, and surging AI infrastructure investment. Core inflation ran at 3.3% in April and was estimated near 3.4% in May, well above the Fed's 2% target. Several participants said AI spending could eventually lower costs through productivity gains, though that effect would take years to appear. Meanwhile, demand for data centers and high-tech equipment keeps adding upward pressure on prices.
Bitcoin Drops 2.7% Following Fed Minutes Release
Bitcoin (BTC) traded near $62,240 on Wednesday, down about 2.7% over the past 24 hours, according to BeInCrypto data at press time. The move followed a preview of the release that flagged Warsh's silence on his own rate projection as a key source of uncertainty. The drop follows Bitcoin options activity that turned call-heavy ahead of the minutes, days after Bitcoin's rebound toward $64,000 on bullish ETF flows.
![Bitcoin Price Performance]()
Bitcoin Price Performance. Source: BeInCrypto
Analysts Link Crypto Weakness to AI Capital Flows
Analysts said the Fed's concerns over AI-related inflation also point to a wider problem for Bitcoin: capital is chasing the AI trade instead of crypto. "A large share of capital that might previously have gone into crypto is now flowing into the US stock market, especially into companies linked to artificial intelligence, data centers, chip production, and energy infrastructure," said Evgeny Popov, editor-in-chief at InvestFuture. Popov added that Bitcoin has failed to offer investors a comparable market narrative. During the latest Middle East escalation, he said, the asset also struggled to prove its "digital gold" case, while the dollar again acted as the main safe-haven asset.
Nikita Zuborev, senior analyst at BestChange, pointed to the same macro pressure. He said a strong dollar and elevated bond yields are still pulling liquidity away from risk assets such as crypto. Ryan Kirkley, co-founder and CEO of Global Settlement Network, said the moves in oil, Treasury yields, and the dollar showed markets were already repricing for a longer inflation fight rather than a one-off shock. The minutes bore that out, tying elevated inflation to AI-related demand, tariffs, and Middle East energy costs. "Crypto is now reacting to oil, rates, the dollar and treasury yields... It bleeds when macro bleeds," Kirkley said.
The next FOMC meeting is scheduled for July 28-29.
FAQ
What did the Federal Reserve decide at its June 16-17 meeting?
The Federal Reserve unanimously held interest rates steady at 3.50% to 3.75% at its June 16-17 meeting. The minutes released on July 8 showed that while all 12 voting members supported the hold, some participants argued a rate increase was justified but ultimately backed the decision to keep rates unchanged.
Why did Bitcoin drop after the Fed minutes release?
Bitcoin traded near $62,240 on Wednesday, down about 2.7% over the past 24 hours following the release of the Fed minutes on July 8. Analysts attributed the drop to the hawkish tone in the minutes, which revealed that nine of 19 officials projected at least one rate hike before the end of 2026, and cited persistent inflation risks from AI spending, tariffs, and Middle East energy costs.
How is AI spending affecting Federal Reserve inflation forecasts?
Fed staff raised inflation forecasts for 2026 and 2027, citing surging AI infrastructure investment as a key factor. Officials noted that demand for data centers and high-tech equipment is adding upward pressure on prices, with core inflation running at 3.3% in April and estimated near 3.4% in May, well above the Fed's 2% target.
