The financial market raised bets on an interest rate hike by the Federal Reserve this week, but keeping the rate unchanged still appears as the most likely outcome. According to contracts traded on Kalshi, there is almost 75% probability that the Fed will keep interest rates at current levels.
At the same time, FedWatch data show that the possibility of a hike at this meeting rose to about 38%, compared with 16% the previous week. The move indicates an important shift in investor expectations.
Another Kalshi contract points to a 68% probability that the Federal Reserve will raise interest rates again in 2026. The market, therefore, has started to consider a more restrictive monetary policy, although keeping rates unchanged continues to lead projections for this week.
Expectations for a hike gained strength after the return of concerns about oil prices. The conflict between the United States and Iran triggered a temporary spike in Brent, which rose above US$ 100 per barrel before falling back to less than US$ 89.
This move added pressure to inflation expectations and increased attention on Kevin Warsh's communication. The president of the Federal Reserve is expected to speak at a press conference on Wednesday, at 14h30, Eastern Time in the United States.
Kalshi contracts indicate more than 50% probability that Warsh will mention the word “shock” during the press conference. The possibility of a reference to “oil” exceeds 70%, showing how energy prices have entered the focus of the bets.
Bank of America assessed that the Federal Reserve tends to treat energy supply shocks with caution. Evercore ISI also considered that an immediate hike would be difficult to justify after the improvement in inflation data in June.
“But we cannot underestimate this probability too much, given Warsh’s refusal to present his strategy and the renewed conflict between the US and Iran, which reignited the energy shock and pushed yields higher,” the company added.
For the cryptocurrency market, the decision remains relevant. An interest rate hike tends to alter liquidity conditions and may increase pressure on riskier assets, while keeping rates unchanged reduces part of this pressure in the short term.