Fed hawks gain the upper hand: 9 out of 18 FOMC members voted for a rate hike in 2026
Kevin Warsh's first meeting as Chairman of the Federal Reserve System (Fed) will be remembered not so much for the decision as for the signal. The key interest rate remained in the range of 3.50%–3.75% — this is already the fourth consecutive meeting without changes, fully aligning with the market consensus forecast. However, the real intrigue lay in the details.
The main surprise was a sharp shift in the FOMC's "dot plot." Nine of the eighteen committee members now forecast at least one rate hike in 2026. Until recently, the majority leaned toward a cut or a prolonged pause. Now, we are seeing not just a pause, but a very real risk of tightening.
Unvarnished rhetoric: neutrality instead of dovishness
The Fed also changed the language of its accompanying statement. References to "additional rate adjustments" disappeared from the text. Instead, emphasis was placed on a "neutral, fully data-dependent" approach. This marks a decisive reversal from the previous "dovish" course that markets associated with Warsh's arrival.
Inflation remains stubbornly around 4.2% year-over-year, double the Fed's 2% target. The committee's statement directly notes that price pressures persist "partly due to supply shocks that have accelerated price growth in certain sectors, including energy." This is a direct acknowledgment that the fight against inflation is far from over.
Market reaction: sell-off in stocks and bonds
Wall Street did not keep waiting. The S&P 500 index fell by 0.6%, the Nasdaq Composite lost 0.7%, and the Dow Jones Industrial Average dropped 160 points (0.3%). Government bond yields rose: two-year Treasuries jumped 11 basis points to 4.153%, and ten-year yields rose 4 basis points to 4.469%.
This scenario is also confirmed by a recent forecast from Citadel Securities, which warned of a growing likelihood of a rate hike as early as September. Company analysts pointed to a strong labor market, high demand, supply disruptions, and a boom in AI investments as factors fueling inflation.
Warsh's debut under the spotlight
At his first press conference, Kevin Warsh emphasized that he prefers a "more restrained" Fed and a reduction in the volume of advance guidance for the market. This statement dashed hopes for a soft approach that many had associated with his appointment. The committee made it clear: controlling inflation is the number one priority, and it is willing to take unpopular measures to achieve it.
Additional pressure on markets comes from the geopolitical backdrop — the energy crisis linked to the situation around Iran is amplifying inflation risks and introducing uncertainty into economic growth forecasts.
Cryptalist analytical conclusion: Markets accustomed to "dovish" rhetoric are now undergoing a painful reassessment. If inflation does not begin to decline steadily in the coming months, the likelihood of a rate hike in September-December 2026 will only increase. For cryptocurrencies and risk assets, this means heightened volatility and a potential outflow of liquidity into safe-haven instruments.