Fed Officials Call for Rate Hikes, While the Market Tells You to Shut Up

First, take a look at two news items:

News 1: Yesterday, Federal Reserve official Loregn said publicly that the Fed “should raise interest rates to deal with stubborn inflation.” The June CPI data isn’t enough to convince her that inflation has returned to a path toward the 2% target. She suggested she might vote against at the FOMC meeting at the end of July.

News 2: At the same time, CME FedWatch data shows the market is pricing in an 88.8% probability that the Fed will keep rates unchanged in July.

One official is calling for rate hikes. The market is telling you: shut up.

Who is Loregn? Not an ordinary official

Loregn is the Dallas Fed president, and she has a voting right on the FOMC this year. She is the first official to publicly call for rate hikes since Wosh took office.

And her wording is extremely direct—raise rates; a month-on-month CPI drop isn’t enough; she leans toward modest rate hikes.

In other words: she thinks inflation isn’t going to work out, and in July she wants to vote no.

Even Fed Vice Chair Jefferson, while saying “the current monetary policy stance is good,” added one more line: if inflation can’t cool down quickly, “then perhaps we should reconsider our current policy stance.”

Hawks are gathering. And the market is sleeping.

The CME data is right here:

July: Keep unchanged 88.8%, hike 25 bps 11.2%

September: Keep unchanged 48.8%, hike 25 bps 46.2%—a coin flip

The market thinks a July rate hike is impossible, so it will flip a coin in September.

So what is Loregn saying? She’s saying the time to hike is now.

How big is this gap? Big enough to trigger violent swings across the entire risk-asset complex around the end-of-July FOMC meeting.

Bitcoin is currently hovering near $64,000, just having pulled back from the $65,500 peak. The CPI-good news has already been digested, and ETF outflows are still ongoing. At a time like this, if you add an unexpected rate hike or a strong hawkish signal—how do you think BTC will move?

There are two kinds of people in the market right now:

First, those betting that nothing will change in July, and nothing will change in September either. They believe inflation has already peaked, and that Wosh’s zero-tolerance stance is just tough talk. These people are holding full long positions now, waiting for rate-cut expectations to ignite the rally.

Second, those betting that Loregn isn’t fighting alone. They believe the first FOMC minutes after Wosh took office have already turned hawkish; the drop in the June CPI is just a temporary fall in energy prices, while core inflation remains stubborn. These people have already been trimming risk, or positioning for hedges.

Which one are you?

My take: Don’t bet on direction—bet on how they respond

Before the end-of-July FOMC, more data still needs to come out. The divergence between officials’ statements and the market’s pricing will be tested, again and again, by the data.

But one thing is certain: the bigger the disagreement, the bigger the volatility.

Bitcoin has just pulled back from the $65,500 high, and the technical picture has already entered a correction cycle. At a time like this, if another policy-side “surprise” comes—whether it’s a rate hike or no hike—the market’s first reaction is always to sell first out of caution.

“In front of the Fed, all technicals are made of paper.”

Final three lines

1. Loregn calls for rate hikes, and the market treats it like fart—but when too many people are farting, the stench will burn everyone.

2. The probability of a September rate hike is already 46.2%. This isn’t a “low-probability event”—this is a coin flip.

3. In a bull market, death comes from rate-hike expectations; in a bear market, death comes from rate-hike execution—and now, we’re stuck in the middle, with no way forward. #PreIPOs第二期OpenAI认购 #盘前合约上线长鑫存储 #台积电Q2净利暴增77.4% $BTC $ETH $