This week, former New York Fed chair Dudley said that a rate hike by the Federal Reserve is “almost a foregone conclusion,” and that it’s not a one-off action but the “start of a series of rate hikes.” The timing lines up: September 16 is the day of the interest rate decision.
The reasons he gave are typical: inflation is still above the 2% target; in August, core CPI rose by about 0.3% month over month; and the unemployment rate is also very low. In this combination, tightening is, in his view, “unusually clear-cut.”
Even more unusual is that he directly called out and criticized the current chair, Waller, for “outsourcing” monetary policy to financial markets, calling it an “extremely bad practice.” In other words, the Fed may not want to simply follow market expectations anymore—it may instead lay out a more rigid path for tightening.
For risk assets, including crypto, this combination of “continuous tightening + weakening market-led influence” often shows up in valuation discounting and liquidity premia. In the next few meetings, the Fed’s actual actions and how it communicates them will be key variables for judging the risk-appetite cycle.
The reasons he gave are typical: inflation is still above the 2% target; in August, core CPI rose by about 0.3% month over month; and the unemployment rate is also very low. In this combination, tightening is, in his view, “unusually clear-cut.”
Even more unusual is that he directly called out and criticized the current chair, Waller, for “outsourcing” monetary policy to financial markets, calling it an “extremely bad practice.” In other words, the Fed may not want to simply follow market expectations anymore—it may instead lay out a more rigid path for tightening.
For risk assets, including crypto, this combination of “continuous tightening + weakening market-led influence” often shows up in valuation discounting and liquidity premia. In the next few meetings, the Fed’s actual actions and how it communicates them will be key variables for judging the risk-appetite cycle.
