The Federal Reserve will announce its latest interest rate decision on July 29. The prevailing market expectation remains that interest rates will remain unchanged, but rising oil prices and escalating tensions in the Middle East are weakening this view. Ahead of the decision, Bitcoin and the overall crypto market have already seen a pullback, with investor risk appetite noticeably contracting.
The market is still betting on no action.
The Federal Open Market Committee (FOMC) is holding a two-day meeting, with the results to be announced tomorrow. According to CME FedWatch data, the market expects a 64% probability of keeping interest rates unchanged and a 35% probability of a 25 basis point rate hike.
The US CPI fell to 3.5% in June from 4.2% in May, initially providing the Federal Reserve with room to hold rates steady. However, the recent rebound in oil prices has changed market expectations. Renewed tensions between the US and Iran, coupled with the breakdown of the ceasefire, have fueled concerns that energy prices could push inflation back up.
Over the past week, market bets on interest rate hikes have risen significantly. Traders now expect an 81% probability of a rate hike by September.
Institutional disagreements began to widen
Institutional assessments of this meeting are divided. Frank Flight, head of macro strategy at Citadel Securities, believes the Federal Reserve may raise interest rates at this meeting. He stated that the market may have once again underestimated the extent of the Fed's shift towards a hawkish stance.
JPMorgan Chase holds a relatively moderate view. The firm expects the Federal Reserve to keep interest rates unchanged this time, but also not to cut rates for the remainder of 2026.
Another set of predictions comes from the betting market. Polymarket data shows that traders expect a 24.65% probability of a rate hike this time, with about 75% of participants betting that rates will remain unchanged.
Crypto market shifts to defense ahead of time
Prior to the resolution's announcement, crypto assets had already experienced a safe-haven sell-off. Bitcoin recently fell to approximately $63,414, and the overall market capitalization of the crypto market declined by about 3% to $2.17 trillion.
Market sentiment also weakened. The crypto fear and greed index fell to 34, indicating that traders were cautious. Large-cap tokens such as Ethereum, XRP, Solana, and Dogecoin generally fell by 3% to 5%.
If the Federal Reserve keeps interest rates unchanged, short-term market pressure may ease; however, if the decision or post-meeting statement is hawkish, risk assets may continue to be under pressure.
