BlockBeats News, June 18th - Earlier today, during the first FOMC meeting after Chair Powell's reappointment, the Federal Reserve stayed put as expected, keeping the federal funds rate target range at 3.50% to 3.75%. The decision was unanimous with a 12:0 vote. What truly caught the market off guard was the dot plot. Out of the 18 officials who submitted forecasts, 9 projected at least one more rate hike this year, 8 expected no change, and 1 anticipated a rate cut. By the end of 2026, the median federal funds rate moved up from 3.4% in March to 3.8%. Additionally, the Fed significantly raised its 2022 PCE inflation expectation to 3.6% and core PCE to 3.3%, signaling a renewed focus on inflation fighting. Market pricing swiftly turned hawkish, with pre-meeting traders seeing a 60% chance of a rate hike by year-end, which increased to over 80% post-meeting.

Core signals from Powell during the press conference were equally cautious—less forward guidance and more data dependence. He explicitly stated he did not submit a dot plot forecast and mentioned that the traditional forward guidance might not be suitable in the current environment. Powell emphasized repeatedly that the FOMC's commitment to reaching the 2% inflation target was "clear and consistent." He indicated that only one policy proposal was on the table during this meeting without discussion of alternative options. Powell also announced the formation of five working groups to review Fed communication, the balance sheet, data sources, productivity and employment, and the inflation framework. This suggests that under Powell's leadership, the Fed may be briefer, less committed, but tougher on inflation issues.

The market's reaction followed the typical "hawkish hold" pattern, with U.S. stocks turning red. The S&P 500 fell by 1.2%, the Nasdaq dropped 1.3%, and the Dow lost around 507 points. The two-year Treasury yield rose rapidly, reflecting increased expectations of a rate hike this year. The U.S. dollar strengthened across the board, pushing the DXY to multi-month highs, while gold faced pressure due to rising real rates and a stronger dollar. In terms of risk assets, Bitcoin had already retraced to around $65,500 pre-meeting, and post-meeting, overall cryptocurrency sentiment remained bearish, briefly dipping below $64,000. If the Fed reopens the door to rate hikes, liquidity expectations will tighten, leading to a repricing of high-valuation tech stocks, cryptocurrencies, and gold.