Inside the Fed’s Hawkish Shift: Why Powell Is Keeping Rate Hikes Alive Despite Market Pushback

The Federal Reserve has shaken the global scenario after Chair Jerome Powell said a rate hike could still happen if tensions in the Middle East increase. He added that decisions will be made meeting by meeting. This comes even as many expected the central bank to start cutting rates. 

While no final decision has been made, just talking about it has already brought fresh volatility to financial markets. 

Analyst Flags a “Crazy” Scenario

A crypto analyst, VirtualBacon, has raised concerns over the Fed’s increasingly hawkish stance, noting that policymakers appear more focused on tackling inflation than supporting economic growth.

According to the analyst, the Fed is not seeing a meaningful rise in unemployment yet, which gives it room to maintain a restrictive policy stance. At the same time, persistent inflation, driven by factors like oil price swings and tariff pressures, is forcing the central bank to stay alert.

The analyst described the Fed rate hike probability under current conditions as unexpected, especially given bigger economic uncertainties.

On top, the Polymarket poll shows the chance of a rate hike has risen to 22% from 8% earlier this month.

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Will There Be a Liquidity Crunch?

The real risk lies in tightening liquidity. A rate hike would further reduce the money supply in the system, putting pressure on risk assets.

The analyst warned that if the Fed proceeds with such a move, markets could face a sharp and widespread sell-off. With sentiment already fragile, even a small policy shift could trigger outsized reactions across equities and crypto.

At this point, the investors should check on upcoming employment data, which could influence the Fed’s final call.

Bitcoin in the Crosshairs

For Bitcoin, the situation remains critical. Higher interest rates typically strengthen the dollar and reduce capital inflows into speculation.

This could lead to increased volatility and downside pressure for Bitcoin and other cryptocurrencies if the Fed turns more aggressive.

For now, uncertainty dominates the outlook. Even without a confirmed hike, the Fed’s tone has already raised concerns, pointing to a potentially unstable phase ahead.

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