Just weeks ago, the interest rate debate in the US centered on how many rate cuts the Federal Reserve would have in 2026. But with the economy showing only faint signs of slowing, inflation remaining above the central bank’s 2% target and oil prices rising 50% in three weeks, interest rate traders are starting to consider a rate hike as early as April.
According to CME FedWatch, the odds that the Fed will tighten policy at its next meeting in April have risen to 12%. That’s up from 0% a week ago and an even sharper turnaround from two months ago, when conventional wisdom said a rate cut was likely that month.
Data from February showed annual headline inflation at 2.4% and core at 2.5%. And these numbers were before the Iran war and subsequent 50% increase in oil prices.
The long end of the bond curve has sold off sharply alongside, with the 10-year U.S. Treasury bond rising another 10 basis points to 4.38% on Friday from below 4% at the start of March.
The bond sale is global. In the UK, 10-year gilt yields have risen above 5%, up 15% in the past month, and are at their highest since 2008.
Bitcoin ahead of the curve?
Bloomberg reports that the S&P 500 is headed for a fourth straight weekly decline, now down about 5% since late February. The Nasdaq is down similarly, including a 1.2% drop on Friday.
“Bitcoin has once again acted as the canary in the macro coal mine,” said Andre Dragosch, European head of research at Bitwise, “At current levels, bitcoin is already pricing in a recession, while many traditional assets are not,” he added.
Bitcoin continues to hover around $70,000 and, aside from oil, remains one of the best-performing assets since the war began, while metals continue to show price weakness, with gold falling another 2% on Friday.
