Wall Street has largely abandoned expectations for Federal Reserve rate cuts this year ahead of the first Federal Open Market Committee meeting led by Fed Chair Kevin Warsh on June 16-17.
Summary
- Most Wall Street economists now expect the Fed to keep rates at 3.50%-3.75% through the end of 2026.
- Rising inflation expectations and Middle East tensions have strengthened the case for a prolonged higher-rate environment.
- Despite macro uncertainty, some institutional crypto investors are accumulating and preparing for regulatory clarity.
According to a Reuters survey conducted between June 4 and June 9, 72 of 102 economists expect the benchmark federal funds rate to remain within the 3.50% to 3.75% range through the end of 2026.
The poll showed the strongest consensus so far this year that policymakers are unlikely to ease borrowing costs in the coming months.
The growing conviction follows a run of stronger-than-expected economic data and persistent inflation concerns. Futures markets have also moved in the same direction, with interest-rate contracts now pricing in at least one possible rate increase by late 2026 rather than a return to rate cuts.
Inflation concerns continue to dominate Fed outlook
Fresh inflation data due on June 10 has become a key focus for investors ahead of the June policy meeting. According to Trading Economics forecasts cited earlier by crypto.news, headline Consumer Price Index inflation is expected to rise 0.5% month-over-month in May after increasing 0.6% in April.
Annual CPI is projected to accelerate to 4.2% from 3.8%, while core CPI, which excludes food and energy, is expected to increase 0.3% on a monthly basis and 2.9% year-over-year.
Those forecasts arrive as inflation remains above the Federal Reserve’s target. Separate Reuters polling showed economists expecting elevated price pressures to persist, while the Fed’s preferred inflation gauge, the Personal Consumption Expenditures Price Index, reached 3.8% in April.
Energy markets have added another source of concern. Several economists cited by Reuters pointed to geopolitical tensions and disruptions in Middle East energy markets as factors that could keep inflation elevated. Recent military exchanges between Israel and Iran contributed to renewed worries about higher commodity prices.
Commenting on the policy outlook, Wells Fargo chief economist Tom Porcelli said it would be difficult for Federal Reserve officials to justify rate cuts under current conditions.
“It’s going to be very hard for the Fed to justify any action at this point and in the foreseeable future. It will be incredibly difficult to get a consensus of Fed officials to go along with the idea of cutting rates.”
Porcelli added that a rapid easing of tensions involving Iran could change the outlook but said there was little evidence pointing in that direction.
Markets prepare for a prolonged higher-rate environment
Expectations for tighter policy have also gained support from major financial institutions. Last week, BNP Paribas revised its forecast and said the Federal Reserve could begin raising interest rates in December 2026.
According to a report by crypto.news, the French bank now expects three rate hikes that would effectively reverse the three cuts delivered during 2025.
Warsh’s first FOMC meeting comes as President Donald Trump continues to publicly advocate lower interest rates. Even so, Warsh has indicated that monetary policy decisions will remain independent of political pressure.
Rabobank senior U.S. strategist Philip Marey told Reuters that inflation risks continue to outweigh the case for policy easing.
“The risk is more towards more persistent inflation and fewer cuts and possibly hikes than any quick resolution,” Marey said. “A more optimistic scenario has just flown out of the window.”
Outside traditional markets, some institutional crypto investors appear to be taking a different view of short-term macro uncertainty.
Javier Martinez, CEO at sFOX, told crypto.news that institutions are accumulating positions and making infrastructure investments while awaiting regulatory developments such as the CLARITY Act.
“From the outside, this moment may look like uncertainty. But inside institutions, it’s a window where capital is being positioned and infrastructure decisions are being made ahead of a more mature crypto market structure.”
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
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