Higher for Longer? Markets React as Fed Cut Odds Collapse
Markets just received a reality check.
Fed rate cut expectations for March 2026 have dropped below 3%, and money markets now price only 37 basis points of cuts for the entire year. That shift is pushing the U.S. dollar to a 3.25-month high and sending risk assets into a pullback.
Gold has slipped nearly 5% toward $5,050, while Bitcoin fell below $87,000, now about 31% down from its record highs.
Traditional markets are reacting too.
The S&P 500 and Nasdaq both dropped over 1%, with tech stocks leading the decline as investors adjust to a “higher for longer” rate outlook. Meanwhile, the 10-year Treasury yield jumped around 10 basis points, reflecting rising rate expectations.
The Fed message remains firm.
Kansas City Fed President Jeff Schmid said inflation is “still too hot” and above the Fed’s 2% target. At the same time, geopolitical tensions in the Middle East are pushing oil prices higher, which could keep inflation pressures alive.
The January FOMC meeting kept rates unchanged, but the Fed upgraded the economic outlook from “moderate” to “solid.” Chair Jerome Powell also emphasized there is “no rush to cut rates.”
For crypto traders, the impact is clear.
Bitcoin briefly tested support near $86,329, while total crypto liquidations surged to $933M in just 24 hours. Correlation between crypto and traditional markets remains high at 0.72+, meaning macro shocks continue to ripple across digital assets.
This environment typically favors defensive sectors, while non-yielding assets like gold and risk assets like crypto face pressure.
Do you think Bitcoin holds the $86K support, or is another macro-driven drop coming?
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