Rate-cut expectations drop to zero and the probability of rate hikes rises: the dot plot shifts toward a re-pricing of the crypto market under revised expectations

U.S. Non-Farm Payrolls Added 172k Jobs in May, CPI Year-over-Year Surpasses 4%, Market Pricing for Federal Reserve Rate Cuts This Year Has Dropped to Zero, CME FedWatch Shows Nearly 70% Probability of at Least 25 Basis Point Hike in December. Kevin Warsh Officially Assumed the Role of the 17th Federal Reserve Chair on May 22, His First FOMC Meeting (June 16–17) Occurs During a Critical Window When Policy Stance Shifts from Rate Cut Guidance to Hold/Rate Hike. The Market Generally Expects the June Dot Plot to Officially Remove the 2026 Rate Cut Guidance, Turning to Maintaining Rates or Even Early Signals of Rate Hikes. Against This Backdrop, the Crypto Market Faces a Threefold Logical Breakdown: the Direct Impact of the Dot Plot Shift on Risk Pricing, the Potential Disintegration of Market Anchors Due to Warsh’s Communication Framework Reform, and the Reconfiguration Path of Multi-Asset Risk Premiums.

Before the New Leader’s First Report: How Will the Market Price the Dot Plot?

In the early hours of June 18 Beijing time, the Federal Reserve will release the June FOMC decision. This is Kevin Warsh’s first policy meeting since taking office, and the first monetary policy statement after the end of the Powell era. Before the decision, market focus centers on three aspects: whether the rate cut bias will be removed from the statement, whether the median forecast in the dot plot will shift substantively, and Warsh’s latest comments on balance sheet reduction and Fed reform.

Since the April FOMC meeting, three Fed officials have publicly stated that the easing bias in the statement should be removed. Non-farm payrolls in May rose by 172k, well above the expected 85k, with the unemployment rate holding at a relatively low 4.3%, and CPI YoY surpassing 4%. Under this data combination, the macro basis for continuing to maintain rate cut guidance no longer exists. Huatai Securities, in a research report released on June 15, predicted that the phrase “the degree and timing of further adjustments to the federal funds rate target range” would be removed from the statement, emphasizing that future policy will fully depend on subsequent data in a neutral stance.

The potential change in the dot plot is the core variable currently priced into the market. In March’s SEP, Fed officials still indicated one rate cut each in 2026 and 2027. As of June 15, CME FedWatch data shows the market’s probability of rate cuts within 2026 has dropped to 0%, with at least a 25 basis point hike in December reaching about 70%. Multiple institutions’ forecasts are consistent: Goldman Sachs has delayed the two rate cuts originally scheduled for December 2026 and March 2027 to June and December 2027, respectively, and considers the path of maintaining rates throughout 2026 as the “most likely scenario”; Nomura also abandoned expectations of rate cuts in 2026 in late May. Sumitomo Mitsui DS Asset Management expects the 2026 median policy rate in the June dot plot to shift from a cut to hold steady, with possibly two rate cuts in 2027. Additionally, some FOMC members’ attitudes toward rate hikes are emerging—market focus is whether the dot plot will show a “rate hike” branch point for the first time.

Warsh’s own stance adds extra uncertainty to this meeting. He explicitly stated at a Senate nomination hearing that he would “not pre-commit to any policy path,” and publicly criticized the dot plot for “keeping the Fed longer than it should be in the realm of forecasts.” His push for communication reform—reducing forward guidance, diminishing the weight of the dot plot, and possibly abolishing it altogether—means the long-standing market reliance on these pricing anchors faces systemic adjustment. However, it is important to emphasize that whether these reforms will be implemented at this meeting remains within expectations and awaits confirmation in the decision statement and press conference.

How Will the Shift in the Dot Plot Transmit to Crypto Assets? Three Pathways Breakdown

Interest Rate Path: From Rate Cut Logic to Pricing the Rate Hike Window

Market expectations for the June dot plot shift essentially mean the formal removal of the Fed’s rate cut guidance. This signifies a fundamental correction to the two main narratives supporting crypto assets—liquidity release during easing cycles and valuation boosts from rate cuts—are now being revised.

This expectation pricing process can be divided into two stages. The first is the accumulation phase of expectations. As of June 15, CME FedWatch shows a roughly 70% chance of a rate hike by year-end, whereas in January, markets still expected a 50% chance of two to three rate cuts within the year. This significant expectation gap has already been partially priced into asset prices over the past two months. The second is the confirmation adjustment phase. When the June dot plot explicitly shows a baseline scenario of rates remaining unchanged throughout the year, or even signals rate hikes, markets will complete the switch from “rate cut pricing” to “rates steady/hike pricing.” This confirmation could trigger a systemic reassessment of crypto valuation models.

Beyond the rate path, the Bank of Japan’s independent policy moves are also noteworthy. During the June 15–16 meeting, there is a possibility of rate hikes to 1.0%. When the BOJ raised rates to 0.75% in January 2026, Bitcoin briefly fell about 3% within hours; this precedent is relevant now. BOJ rate hikes will tighten liquidity supply in global arbitrage trading, creating a double tightening pressure when combined with the Fed’s rate hold expectations.

Inflation Perspective: Warsh’s “Trimmed Mean” and Potential Decoupling of Market Inflation Expectations

One of Warsh’s core reform directions is adjusting the inflation measurement framework. At his April nomination hearing, he emphasized that traditional CPI/core PCE indicators might overstate actual inflation pressures. The Dallas Fed’s trimmed mean PCE currently shows a 2.3% increase, while the same period’s core PCE YoY hits 3.3%, with a 1 percentage point gap.

This stance’s internal and external tensions will directly influence crypto market pricing. If markets gradually adopt Warsh’s inflation judgment after the decision, real interest rates will be higher than nominal rates, increasing the holding costs of non-yielding assets like gold and crypto. Conversely, if markets continue to rely on traditional inflation measures, the hawkish turn in the dot plot will be interpreted as policy lagging behind inflation, potentially strengthening the narrative of crypto as an inflation hedge.

More importantly, communication framework reforms could weaken the pricing anchors. Warsh publicly advocates reducing forward guidance, diluting or abolishing the dot plot, and lowering press conference frequency. If these reforms are announced or partially implemented at this meeting (still within expectations), the macro signals long relied upon—FOMC statements, dot plots, and Warsh’s press conferences—will see their predictive value systematically decline. In this environment, short-term volatility in crypto assets may rise as markets lose clear policy path references.

Rebuilding Multi-Asset Risk Premiums: Divergent Transmission Chains for Three Asset Classes

Gold’s response to the dot plot shift is relatively straightforward: rising real interest rates increase holding costs, coupled with a strengthening dollar. Historically, gold’s pricing in anticipation of rate hikes often adjusts before the dot plot release, with June’s FOMC mainly serving as a confirmation rather than a directional shift.

U.S. equities’ sensitivity depends on whether the dot plot shift is accompanied by significant revisions to earnings expectations. Huatai Securities predicts the Fed will lower its 2026 economic growth forecast and raise inflation expectations, implying both corporate earnings growth and discount rates will face pressure. If the dot plot also raises the neutral rate in the SEP, long-term discount rate central tendency in equity valuation models will shift upward.

Crypto assets’ transmission chain combines features of both asset types but is more complex. They are affected by three channels: liquidity, risk appetite, and narrative.

Liquidity-wise, rate stability means dollar funding costs do not decrease, making stablecoin lending rates and leverage trading costs in DeFi less likely to fall. However, rate stability impacts crypto less than rate hikes. On risk appetite, shifting from rate cut guidance to rate hold signals a move from “accommodative” to “neutral,” historically associated with risk asset turning points. Regarding narratives, if Warsh’s inflation measurement reforms are accepted, crypto as an “inflation hedge” may see its narrative space squeezed; if traditional inflation metrics are deemed more reliable, the dot plot shift will be seen as policy lag, potentially reinforcing safe-haven narratives.

The net effect of these channels depends on which inflation narrative the market ultimately adopts post-decision.

Crypto Market Positioning Before the Decision

According to Gate data, as of June 15, Bitcoin trades around $65,000, with a intraday high of $65,880, up about 1.5–1.7% in 24 hours; Ethereum up about 2.28% to $1,719.5. Before the FOMC decision, market sentiment remains cautious, with price movements driven more by expectation gaps than directional breakthroughs.

From a medium-term perspective, crypto’s current technical state is in a “decision zone” rather than a clear trend. Mainstream assets are still over 20% below their 2026 year-highs. Recent dips triggered by stronger-than-expected employment data saw Bitcoin briefly fall below $60,000 before rebounding about 7%, but significant disagreement remains on whether a bottom has formed.

Key variables to watch before the decision include: whether the BOJ signals a rate hike, which would directly impact global arbitrage liquidity; the specific figures of the 2026 and 2027 median rates in the dot plot, especially the shift from rate cuts to hold; and whether Warsh mentions abolishing the dot plot or reducing forward guidance in his press conference. Each of these could trigger re-pricing across the three transmission channels discussed above.

Conclusion

Market expectations for the June dot plot shift mark a significant adjustment in the Fed’s monetary policy narrative framework. The systematic exit of rate cut expectations extending into 2026 is replacing it with a baseline scenario of steady or rising rates. For crypto markets, this change transcends mere interest rate adjustments; it involves a reassessment of the credibility of the dot plot as a forecasting tool, the impact of Warsh’s inflation measurement reforms on market narratives, and the combined effects of global central bank policy shifts (Fed + BOJ) on liquidity.

In a macro environment where rate cut expectations are evaporating, the probability of rate hikes is rising and partly priced in, and the decision remains pending, the crypto volatility window is now open. Whether the median dot plot aligns with market expectations or not, and how quickly Warsh’s communication reforms are implemented, will be critical tests for crypto assets in the $60,000–$65,000 range.