The Federal Reserve left interest rates unchanged at 3.50% to 3.75% on July 29, with a 9-3 vote, but the mood quickly turned hawkish. Fed Chair Kevin Warsh emphasized a firm commitment to price stability, shutting down any talk of a softer inflation target and reinforcing the 2% goal.
Following the meeting, traders adjusted their bets significantly. The CME FedWatch tool now places a 61.4% chance on a 25 basis point hike at the September 16 meeting, up from just over 50% a month ago. The probability of a larger 50 basis point increase vanished entirely, dropping from 25% to zero. Markets are clearly pricing in a tightening path, with no expectations of rate cuts anytime soon.
Prediction markets like Kalshi and Polymarket reflect this shift too. Kalshi traders give about a 53% chance of a 25-point hike, while Polymarket's odds stand near 52%, both surpassing the chance of a hold. More than $1.36 million and $8 million have traded on these platforms respectively, showing strong conviction among participants. This repricing comes amid persistent inflation concerns that continue to weigh on policymakers.
Fed watchers will be watching closely, as this hawkish tone contrasts with recent softer signals that had sparked optimism. The firm stance may ripple through markets, impacting sectors sensitive to borrowing costs and investor sentiment. Bitcoin’s August outlook reflects this dynamic, showing how Fed moves influence crypto markets in unpredictable ways.
This material is for informational purposes only and does not constitute financial advice.
