Fed Hikes Rate Cut Odds to 40% as Bull Market Cautious

Market participants are growing increasingly cautious about the future trajectory of the bull market, as the likelihood of a Federal Reserve rate cut in the near term appears to be fading. According to recent assessments, the probability of the Fed cutting interest rates has fallen to 40%, signaling a more conservative approach to monetary policy in response to current economic conditions. This shift in sentiment reflects a broader recalibration of market expectations, especially in light of the Fed’s recent decisions to maintain rates within the 4.25%-4.50% range [1].

Investors revised down expectations for a rate cut in September after Federal Reserve Chair Jerome Powell’s non-committal responses during a press conference. Powell emphasized that the economic outlook “remains elevated” and noted that increased tariffs are already affecting consumer prices. He explicitly stated that no decisions about September are made in advance, leaving the door open for future action depending on the next two months of economic data [1].

The market’s reaction has been mixed, with crypto markets dipping slightly following the announcement but rebounding during the Thursday morning trading session in Asia. Total capitalization was around $3.94 trillion, with the market continuing to trade within a range-bound channel for the past fortnight. US interest rates remain close to their highest levels in over a decade, which typically supports crypto markets by making traditional savings accounts less attractive [1].

One crypto analyst suggested that the Fed’s cautious stance could lead to a slower-paced crypto bull run. According to Nick Ruck, director at LVRG Research, if the Fed maintains its current approach, the bull market’s pace may slow, though the underlying liquidity surge could still support a future rebound [1]. Meanwhile, Henrik Andersson, chief investment officer at Apollo Capital, noted that the market had already priced in no rate cut this week, so the Fed’s decision was not unexpected [1].

However, the market still expects one to two rate cuts before year-end, according to some analysts. The uncertainty surrounding tariffs and the ongoing trade tensions have been key factors in delaying the Fed’s rate-cut timeline [1].

Notably, the Fed meeting also saw a rare dissenting vote from two commissioners—the first time in 30 years—highlighting internal debate over the appropriate policy path. Christopher Waller, a governor, and Michelle Bowman, vice chair for supervision, supported a rate cut by a quarter of a percentage point [1].

US inflation, currently at 2.7%, has risen for the past four months, adding pressure on the Fed to address inflation while also managing economic growth concerns. Powell’s wait-and-see approach defies calls from US President Donald Trump for lower rates, as the Fed seeks to balance inflation risks against the potential for economic slowdown due to trade disputes [1].

Sources:

[1] Argus Technical Assessment: Bullish in the Intermediate-Term (https://m.fastbull.com/institution-article/ic-markets-europe-fundamental-forecast--30-july-4337661_0)