Fed hawks gain the upper hand: nine votes for a rate hike in 2026 — markets in shock
Kevin Warsh's first meeting as head of the Federal Reserve (Fed) will be remembered not for the decision itself, but for the atmosphere that prevailed in the room. Yes, the rate remained unchanged in the range of 3.50-3.75% — this is already the fourth consecutive time. But the real sensation lies in the details: nine out of eighteen members of the Federal Open Market Committee (FOMC) voted for a rate hike in 2026.
Shift in Course: From Dovishness to Neutrality
This is a radical shift from previous expectations. Not long ago, the majority leaned towards a cut or, at the very least, a prolonged maintenance of the current level. Now, the rhetoric has changed. The accompanying statement removed the mention of "additional rate adjustments," and the regulator has adopted a pointedly neutral approach, entirely dependent on incoming data. And this is against a backdrop of inflation stubbornly hovering around 4.2% year-over-year.
As an analyst, I see this as a clear signal: the Fed is no longer considering a policy easing option. On the contrary, we stand on the threshold of a new tightening cycle. Citadel Securities' forecast of a growing probability of a rate hike as early as September, driven by a strong labor market, high demand, and an AI investment boom, now looks not just like a hypothesis, but a working scenario.
Warsh's Debut: A Hawk in New Wrapping
At his first press conference, Warsh made it clear that he prefers a "more restrained" Fed and intends to reduce the volume of advance guidance for the market. This dashed hopes for a dovish approach that many had associated with his arrival. Fidelity analysts had warned of potential volatility in the debt market due to uncertainty in the tone of communications — and their forecast came true.
Markets reacted immediately. The S&P 500 fell 0.6%, the Nasdaq Composite lost 0.7%, and the Dow Jones dropped 160 points. The yield on two-year Treasury notes surged 11 basis points to 4.153%, while the ten-year yield rose 4 basis points to 4.469%. The dollar strengthened. This is a classic reaction to a hawkish signal.
The Fed's statement emphasizes that inflation still exceeds the 2% target, partly due to supply shocks that have accelerated price increases in certain sectors, including energy. The energy crisis related to the situation around Iran only adds fuel to the fire, heightening uncertainty in economic growth estimates.
My conclusion: Markets, including the cryptocurrency market, should prepare for a prolonged period of "expensive money." A rate hike in 2026 is no longer a distant threat, but a very real baseline scenario. For risk assets, this means increased pressure and a downward revision of valuations.