#IsraelStrikesIranBTCPlunges A drastic shift in policy?

Recently, the Federal Reserve closed the door on rate cuts. On June 18, the Federal Reserve kept interest rates between 3.5% and 3.75%, but the real shock was hidden in the forecasts. Nine out of 18 policymakers now expect to raise rates this year. Inflation expectations have been sharply revised upward. Growth has been downgraded. The era of "keeping rates higher for longer" has become more entrenched.
🔹Rewriting inflation for the scenario
It is now expected that the core Consumer Price Index will be at 3.6%, up from March estimates. The core CPI rose to 3.3%. Both remain stubbornly above the 2% target, and the committee no longer pretends this is temporary. The median forecast for the end of 2026 jumped to 3.8%, indicating that the next move is more likely to be higher than lower. Hopes of rate cuts, temporarily sparked after the ceasefire in Iran, have been extinguished.
🔹Growth slows while the unemployment rate tightens
Real GDP has been revised to 2.2%. However, the labor market remains tight at a 4.3% unemployment rate. This mix — slower growth, persistent inflation, tight jobs — is the classic stagflation scenario. It ties the Fed’s hands and forces it to adopt a hawkish stance even as the economy cools. The soft landing pathway is shrinking.
🔹Risk assets absorb the shock
Stocks initially fell on the dot plot before recovering at the end of the week, with the S&P 500 closing at 7,500. However, margin debt exploded to a record $1.4 trillion, and the VIX at 16.8 indicates complacency. Bitcoin, which was recovering from historic fund flows and miner capitulation, held around $64,000, but faces a becoming hostile macro environment. Cryptocurrencies thrive on liquidity, and the Federal Reserve just signaled that liquidity will not go anywhere.
🔹Bond market reaction
The two-year bond yield jumped to 4.19%, reflecting expectations for short-term rates. The 10-year bond yield rose to 4.46%, while the 30-year yield slightly declined. The yield curve remains deeply inverted, a recession signal that has not yet been triggered. The bond market is assessing the risk of policy error: the Fed raising rates while growth slows.
Federal Reserve forecasts now point to a tightening cycle. Nine members see a rate hike. Inflation is more stubborn than anyone expected. The shift markets had been anticipating has now turned in the opposite direction.
Do you think the Federal Reserve will raise rates again this year, or is this just a hawkish trick to keep inflation expectations anchored?
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⚠️ Not financial advice.