Bond traders are increasingly betting on a July interest rate hike by the Federal Reserve, with futures volume reaching record levels. According to CME Fed funds futures, the odds of a July rate hike peaked at around 40% before settling to approximately 30% after fresh economic data was released. The market is also pricing in nearly an 80% chance of a September rate hike.
At his debut FOMC meeting on June 17, new Fed Chair Kevin Warsh signaled a hawkish stance, with nine out of 18 policymakers anticipating at least one 25 basis point hike before year-end. The current benchmark federal funds target range sits between 3.50% and 3.75%, and a 25 basis point hike in July would push that range to 3.75%-4.00%.
Rate hikes typically strengthen the dollar, increase borrowing costs, and pull capital away from speculative assets like cryptocurrencies. With Warsh's private investments linked to crypto projects, his policy decisions may have an added layer of complexity for digital asset valuations.