The Federal Open Market Committee begins its September 15–16 policy meeting with interest rate futures pricing in an 85% to 93% probability of a 25-basis-point rate hike. August core CPI data ran hot for a second consecutive month, while Chair Kevin Warsh’s hawkish tone at Jackson Hole led markets to abandon easing expectations. The CME Group FedWatch tool put the odds at 90%, and Prime Terminal showed 93%.
US Treasury yields surged ahead of the decision. The benchmark 10-year yield climbed to 5.014%, its highest since October 2023, before easing to about 4.99%. The 2-year yield rose to 4.666%, and the 30-year yield gained to 5.374%. A sustained move above 5.02% would mark the highest 10-year yield since July 2007. Jay Woods, chief market strategist at Freedom Capital Markets, said a rate hike would be “the cleaner decision” based on economic data and market pricing, while leaving rates unchanged could trigger a negative reaction because it may suggest the Fed remains behind the curve.
For crypto markets, the shift is a potential headwind. Higher Treasury yields increase the opportunity cost of holding non-yielding risk assets, support the US dollar, and tighten financial conditions. The Dollar Index rose nearly 0.60% to 99.66 as yields climbed. Bitcoin and Ethereum are especially exposed to this macro repricing because they are among the most liquid crypto risk assets and tend to track global liquidity conditions.
Inflation pressures remain broad. Rising crude oil prices tied to the US-Iran conflict and a Houthi attack on the Saudi Arabia East-West pipeline have added to concerns. Treasury Secretary Scott Bessent has sought to ease long-end yield pressure through an expanded bond buyback programme, though BMO Capital Markets strategists argued that more active buybacks would not address the fundamental forces pushing 10- and 30-year yields higher. On the equity side, floating-rate lenders Ares Capital, Starwood Property Trust, and Ladder Capital are viewed as potential beneficiaries of higher rates, while a hawkish Fed outcome could leave already priced-in markets volatile.
