🚹 THE WORST-CASE SCENARIO FOR MARKETS IS STARTING TO UNFOLD.

The Fed just hiked rates by 25 bps, and Warsh’s message afterward was even more hawkish.

‱ Inflation is “too high” and has stayed above target for too long.

‱ The economy has strengthened and the labor market remains in good shape.

‱ Price stability is now the Fed’s main focus.

‱ Rising bond yields are being driven by economic strength, massive competition for capital and geopolitics.

‱ Warsh refused to rule out further hikes.

‱ Traders are now betting on TWO more rate hikes before year-end.

‱ And Warsh made the Fed’s position clear: “Today’s action starts to show we are serious about this.”

The Fed is hiking, bond yields are surging, and more hikes are now being priced in.

The message is pretty clear: the Fed is not done tightening yet.

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