On July 9, 2026 (Beijing time), the Federal Reserve released the minutes from its June 16–17 Federal Open Market Committee (FOMC) policy meeting. This meeting, the first chaired by the new Fed Chair Kevin Warsh, revealed that while the committee unanimously voted to keep the federal funds rate target range unchanged at 3.50% to 3.75%, internal disagreements over the future rate path remain unresolved. The hawkish signals sent by the dot plot are forcing global risk assets—including crypto assets—to reassess their valuation frameworks.
As of July 9, 2026, according to Gate market data, Bitcoin traded at $62,178, down 2.0% over 24 hours, while Ethereum stood at $1,740, also down 2.0% in the same period. The core issue the market is digesting: Why has the rate cut narrative faded within three months, and how has the possibility of rate hikes returned to the agenda?
How Did the Dot Plot Reverse from "No Rate Hikes" to "9 Officials Supporting Hikes" in Just Three Months?
In March, the dot plot showed that none of the 19 Fed officials expected a rate hike in 2026, with the median rate forecast at 3.4%. The mainstream market interpretation was that "there’s still room for rate cuts this year." At that time, 12 officials anticipated rate cuts within the year, while 7 expected rates to remain unchanged.
By June, the landscape had shifted dramatically. Warsh himself did not submit a rate forecast—consistent with his long-standing reservations about the dot plot and Summary of Economic Projections. Among the 18 officials who did submit forecasts, 9 projected rate hikes in 2026—3 anticipated one hike (25 basis points), 5 expected two hikes (50 basis points), and 1 projected three hikes (75 basis points). Meanwhile, the number of officials expecting rate cuts plummeted from 12 in March to just 1 in June.
The median forecast for the federal funds rate at the end of 2026 was raised from 3.4% in March to 3.8%. Median projections for 2027 and 2028 were also increased to 3.6% and 3.4%, respectively, while the long-run neutral rate forecast remained unchanged at 3.1%. The median of the dot plot now points to no rate cuts in 2026—a perfect split, with 9 votes for hikes and 9 for holding steady (including Warsh’s abstention).
With 9 Votes Each for Hiking and Holding, What Is the Fed Debating Internally?
The minutes show that out of 18 participants, 9 believe at least one rate hike will be needed by the end of 2026, with 6 of them seeing the need for two hikes. The other 9 officials expect rates to remain unchanged or even decrease.
The minutes explicitly state that participants’ individual assessments of appropriate monetary policy, based on what they each see as the most likely economic scenario, are "evenly divided" into two camps. Some members believe inflation will gradually cool, creating room for rate cuts. Others expect prices to remain elevated, requiring further rate hikes.
This split is not accidental. US inflation has risen year-over-year to 4.1%, well above the Fed’s 2% policy target. In May, the Personal Consumption Expenditures (PCE) Price Index rose 4.1% year-over-year, the highest since 2023. Core inflation, excluding food and energy, increased by 3.4%. The Summary of Economic Projections simultaneously raised the 2026 core PCE inflation forecast from 2.7% to 3.3%. On top of rising inflation, the 2026 GDP growth forecast was revised down from 2.4% to 2.2%. This "quasi-stagflation" mix adds extra complexity to the rate hike path.
One detail in the minutes is noteworthy: a minority of participants felt there was "already sufficient reason to hike" at the June meeting, but ultimately supported holding rates steady. This suggests that the divergence seen in the dot plot reflects differing views on the outlook, rather than a split over current policy actions.
Why Did the Fed Include AI Investment in Its Inflation Discussion Framework for the First Time?
This is the most groundbreaking aspect of the latest minutes. For the first time, the Fed formally included artificial intelligence investment in its inflation discussion. Just months ago, AI infrastructure investment was barely on the Fed’s radar as a key inflation driver. Now, it’s listed alongside Middle East conflicts and tariffs as one of the three main forces fueling inflation.
Several officials pointed out that surging demand for AI infrastructure could drive up prices for technology products and electricity, intensifying short-term inflation pressures. The minutes state: "Several participants remarked that price pressures have become more widespread, with most goods and services… experiencing significant price increases."
Introducing this variable carries far-reaching implications. AI capital expenditures are becoming a new structural source of inflation—not only affecting the tech sector itself but also rippling through the broader price system via electricity consumption, data center construction, chip manufacturing, and other upstream and downstream industries. For the crypto market, this means that the drivers of inflation are expanding from traditional monetary and fiscal factors to technology-driven supply-side cost increases, which are more complex and harder to predict in terms of monetary policy response.
How Is the Market Pricing the Odds of Rate Hikes in July and September?
According to the CME FedWatch tool as of July 7, 2026, the probability that the Fed will keep rates unchanged at the July FOMC meeting is 74.3%, while the chance of a cumulative 25 basis point hike is 25.7%. This distribution suggests that the market has largely ruled out a July rate hike as its base case.
More attention is focused on the September probability matrix: the odds of holding rates steady are 42.9%, a 25 basis point hike stands at 46.2%, and a 50 basis point hike at 10.8%. This means the market sees the September meeting as the real battleground for the second half of 2026—rate hike and hold probabilities are nearly even, reflecting peak division.
The June nonfarm payrolls report, released on July 2, directly triggered recent shifts in these probabilities. The report showed only 57,000 new jobs, well below the market’s expected 110,000–114,000. April and May figures were revised down by a combined 74,000. Before the data, the market priced July hike odds at about 30%; after the release, that dropped to under 20%. However, the unemployment rate fell from 4.3% in May to 4.2%, indicating some resilience in the labor market. This gives the Fed more policy space on the "employment" front, allowing greater focus on inflation.
How Do Rate Hike Expectations Change Crypto Asset Valuation Logic?
Crypto assets, as zero-yield, highly volatile, and liquidity-sensitive instruments, have their valuation logic deeply intertwined with the Fed’s monetary policy path. The shift from a "rate cut trade" to a "rate hike narrative" means the core assumptions of valuation models are being rewritten.
Under the "rate cut trade" framework, markets expect looser liquidity to suppress risk-free rates, boosting the relative appeal of risk assets. Capital flows out of low-yield safe assets into higher-risk assets, including crypto. But when the narrative shifts to "rate hikes," the logic reverses: higher policy rates raise yields on safe assets, increasing the opportunity cost of holding zero-yield assets like Bitcoin.
After the June FOMC meeting, market expectations for a rate hike this year surged above 80%. Although subsequent jobs data tempered these odds, the policy shift revealed by the dot plot has already occurred. The minutes show that among the 9 officials supporting hikes, 5 expect a 50 basis point increase and 1 anticipates 75 basis points—if realized, such aggressive hikes would put significant pressure on crypto market liquidity.
However, there’s still a chance that rate hike expectations could recede. In the two inflation reports since the US-Iran conflict began, there’s been no clear structural pass-through of higher prices into core inflation. The US and Iran have signed an agreement, and while oil prices haven’t fully returned to pre-conflict levels, they’ve retreated significantly from their peaks. If oil prices continue to decline and their inflationary impact diminishes, rate hike expectations for the year could still pull back.
Why Has Warsh’s Communication Overhaul Left Markets More "Confused"?
Another focal point of the latest minutes is Warsh’s overhaul of the Fed’s communication style. Most officials supported shortening post-meeting statements and agreed to remove language hinting at the next policy move. The final statement shrank from 341 words in April to about 130 words, omitting references to a "dovish bias" and forward guidance on potential rate cuts. The statement no longer discusses the economic or policy outlook, instead emphasizing that future decisions will be data-dependent.
At the press conference, Warsh made it clear that the Fed will not revisit its inflation target until inflation returns to 2%. He also announced the creation of five independent working groups covering communication, balance sheet management, data sources and reliance, productivity and employment, and the inflation framework.
This "Greenspan-esque" ambiguous communication style leaves markets to set prices in the absence of clear policy signals, amplifying volatility in rate hike expectations. Not only did Warsh abstain from submitting a rate forecast, but he also explicitly dismissed the dot plot’s guidance value at the press conference, calling it merely a "scenario with an eraser," not a commitment to future policy.
What does this mean for the crypto market? The disappearance of forward guidance reduces the predictability of policy paths. Markets have lost a key policy anchor and must now rely more heavily on real-time interpretation of economic data. This could further increase crypto asset volatility—each inflation print or jobs report could trigger sharp repricing of expectations.
FAQ
Q: Did the Fed actually hike rates at the June meeting?
No. The FOMC voted 12–0 to keep the federal funds rate target range at 3.50% to 3.75% for the fourth consecutive meeting. The hawkish signals come from the dot plot’s projections for the future rate path, not from the current policy decision itself.
Q: What does it mean that 9 officials support rate hikes?
Among the 18 officials who submitted rate forecasts, 9 expect at least one rate hike by the end of 2026. Of these, 3 expect a 25 basis point hike, 5 expect 50 basis points, and 1 expects 75 basis points. In March, no officials made such projections.
Q: Why does AI investment affect inflation?
The minutes highlight that strong demand for AI infrastructure could push up prices for tech products and electricity, intensifying short-term inflation pressures. AI capital expenditures ripple through the broader price system via data center construction, chip manufacturing, and electricity consumption, making it a new structural source of inflation.
Q: What are the odds of a July rate hike?
As of July 7, 2026, CME FedWatch data shows a 25.7% probability of a 25 basis point hike in July, and a 74.3% chance of no change. The market has largely excluded a July hike from its base case.
Q: How will crypto assets be affected?
Rising rate hike expectations mean higher risk-free rates and a greater opportunity cost for holding zero-yield assets like Bitcoin. The shift from a "rate cut trade" to a "rate hike narrative" is forcing a revaluation of crypto asset models. However, there’s still a chance that rate hike expectations could recede, with the ultimate path depending on how inflation and employment data evolve.
