Fed Rate Hikes: BMO Sees Two Increases by Year-End
BMO economist Jennifer Lee expects the Federal Reserve to deliver at least two rate hikes by the end of 2026 as policymakers respond to persistent inflation. The federal funds rate is currently 3.63%, while markets assign a 90% probability to a hike at the upcoming 16 September FOMC meeting. The outlook suggests continued monetary tightening, with inflation, employment data and comments from Fed officials likely to shape expectations for further Fed rate hikes. For crypto traders, higher US interest rates could strengthen the dollar, reduce liquidity and weigh on risk assets such as Bitcoin and Ethereum. However, much of the expected policy tightening may already be reflected in market pricing, which could limit the immediate reaction unless the Fed signals a faster or more aggressive path.
Bearish
The outlook is bearish for crypto because additional Fed rate hikes would normally raise Treasury yields, support the US dollar and reduce available liquidity. Those conditions have historically pressured Bitcoin and other high-beta assets, particularly when markets shift from expecting easing to pricing prolonged tightening. The 90% probability of a near-term hike means part of the risk is already priced in, so the immediate reaction may be modest. A stronger bearish move could follow if the FOMC signals two or more hikes, raises its inflation outlook or pushes back against expectations of future rate cuts. Conversely, softer inflation or weaker employment data could reduce hike expectations and support a relief rally in crypto. In the short term, traders should monitor Fed guidance, the dollar index, Treasury yields, Bitcoin ETF flows and funding rates. Over the longer term, sustained restrictive policy could cap crypto valuations, while an eventual shift towards rate cuts could restore liquidity and improve risk appetite.