Why did Balkin's statement, despite inflation data lagging until April, put the Federal Reserve in a dilemma?

Federal Reserve official Balkin recently summed up the core dilemma facing the Fed: inflation data may not fully catch up with the current economic situation until April. This seemingly technical statement actually implies that the Fed’s rate cut decisions will face more uncertainty, which also explains why market expectations for policy paths into 2026 have been swinging recently.

What does inflation data lag mean?

Balkin’s emphasis on “data lag” is not a minor issue. The core logic behind the Fed’s policymaking is: look at the data, speak based on facts, and avoid preset directions. But if key inflation data won’t fully reflect the current situation until April, it presents a dilemma for the Fed.

The current situation is as follows:

• Inflation has fallen sharply from high levels but has not yet fully reached the 2% target
• The labor market remains stable, with no clear signs of deterioration
• Economic growth remains resilient, but structural issues are accumulating

In this environment of “unclear data,” disagreements among Fed officials naturally surface. According to the latest reports, the Fed has already split into three camps:

Why does Balkin emphasize “fine-tuning”?

Balkin’s statement reflects a reality: the Fed is now walking a tightrope. On one side, doves are clamoring for large rate cuts; on the other, there are concerns about inflation rebound. In this context, waiting for more complete inflation data is a rational choice.

Market expectations have already priced in this cautious stance:

• Probability of holding rates in January is as high as 81.7% (only 18.3% chance of rate cuts)
• By March, the chance of a 25 basis point cut is only 40.7%
• The market expects only two rate cuts throughout the year, with year-end rates at 3.00%-3.25%

These figures indicate that the market has already accepted the reality that the Fed will slow down rate cuts.

Impact on the crypto market

Interestingly, despite the uncertain outlook for Fed policy, the cryptocurrency market has rebounded. This is because:

• Record highs in US stocks themselves send positive signals (Dow and S&P 500 both hit new closing highs)
• Rate cut expectations have been delayed but not disappeared
• Institutions and retail investors are positioning early, betting on rate cuts if inflation data improves

However, the sustainability of this rebound depends on a key question: Will April’s inflation data improve as expected?

If the data meets expectations, the Fed might initiate a clearer rate cut cycle in May or June, providing a basis for the current rebound. But if inflation remains “sticky,” the Fed may continue to hold a wait-and-see stance, and market enthusiasm could cool down.

Summary

Balkin’s statement essentially means: The Fed currently lacks sufficiently clear data to make aggressive decisions, so it will adopt a wait-and-see approach and gradually adjust policies. This explains why internal disagreements seem so pronounced—the reality is everyone is waiting for April’s inflation data to “set the tone.”

For the crypto market, a short-term rebound has already begun, but the big trend depends on inflation data performance. Investors need to understand that: Rate cuts are not off the table; they might just come later than the hawks expect, and the process will be more cautious. For crypto holders, this is both a challenge and an opportunity—key is understanding policy logic rather than blindly following the crowd.