Hedge fund giant Citadel, through its macro strategist Frank Flight, projects that the Federal Reserve will raise interest rates by 25 basis points at the July 30 FOMC meeting, pushing the federal funds rate from its current 3.5% to 3.75% range up to 3.75% to 4%. This forecast contradicts the consensus among economists polled by Reuters, who expect rates to remain steady, with implied probability on CME FedWatch standing at just 46.5%. Citadel justifies this call by referencing Fed Chairman Kevin Warsh’s desire to reinforce his inflation-fighting credibility by demonstrating willingness to act on data rather than market expectations. Such an unexpected hike would ripple through all risk assets by increasing borrowing costs for leveraged positions and shifting capital toward safer instruments like Treasuries. For crypto investors, the key indicators to monitor will be the dollar index, 2-year Treasury yields, and funding rates across major crypto exchanges.
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