Fed Keeps Rates on Hold; Year-End Hike Odds Climb to 66% After 2026 Cut Removed From Dot Plot

Kevin Warsh chaired his first Federal Open Market Committee meeting on June 16, with the Federal Reserve keeping its policy rate unchanged at 3.5% to 3.75%. Markets had largely expected the decision, with a 97% probability of a hold priced in ahead of the meeting. The June dot plot—compiled without Warsh's participation—dropped its last remaining projection for a rate cut in 2026. In response, futures markets now imply a 66% chance of at least one additional rate hike before year-end. Analysts at Raymond James had expected at least three voting members to signal a hike before December. Why it matters: A higher-for-longer rate path can tighten liquidity expectations and pressure risk assets as investors reprice policy toward more tightening. Market sentiment: Bearish, risk-off, macro-driven de-risking. What's driving it: The jump in hike expectations is eroding liquidity assumptions, a headwind for crypto and other liquidity-sensitive assets. Historical parallel: In June 2023, the Fed also paused, while the dot plot pointed to another 50 basis points of hikes—taking rates to 5.50% to 5.75% by end-2023. Standard Chartered said major asset prices were little changed after that decision, highlighting how a hawkish pause can reset expectations without triggering immediate disorderly moves. (Standard Chartered) What's different now: The focal point is the removal of a 2026 cut projection, alongside Warsh's first major messaging as chair. Ripple effects: Higher expected policy rates can curb demand for leveraged crypto exposure by increasing the cost of holding risk assets. If hike odds stay elevated, liquidity-sensitive assets may remain more exposed to further policy repricing. The transmission channel is macro liquidity rather than crypto-market mechanics. Opportunities and risks: - Opportunities: If futures pricing stabilizes after the Fed's no-cut signal, a pause in deteriorating liquidity expectations could offer a cleaner entry point for risk assets. - Risks: If hike odds continue rising following Warsh's inflation-first tone, cutting leveraged exposure may help limit downside tied to tighter liquidity expectations.