Just a few weeks ago, the interest rate debate in the United States focused on how many times the Federal Reserve would cut interest rates 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 beginning to consider a rate hike as early as April.
The probability of the Fed tightening policy at its next meeting in April has risen to 12%, according to CME FedWatch. That’s up from 0% a week ago and an even bigger reversal from two months ago, when conventional wisdom suggested a rate cut was likely this month.
February data showed annual headline inflation at 2.4% and core inflation at 2.5%. These numbers were before the Iran war and the subsequent 50% surge in oil prices.
The long end of the bond curve has also sold off sharply, with the 10-year Treasury note rising another 10 basis points on Friday to 4.38%, compared with less than 4% in early March.
The bond sell-off is global. In the UK, 10-year government bond yields jumped above 5%, rising 15% in the past month to their highest level since 2008.
Is Bitcoin leading the way?
Bloomberg reports that the S&P 500 is on track for its fourth consecutive weekly loss, having fallen about 5% since the end of February. The Nasdaq saw a similar decline, falling 1.2% on Friday.
“Bitcoin is once again acting as the canary in the macro coal mine,” said Andre Dragosch, head of European research at Bitwise. He added, “At current levels, Bitcoin is already pricing in a recession, while many traditional assets are not.”
Bitcoin continues to hover around $70,000 and, aside from oil, remains one of the best-performing assets since the war began, while metals price action continues to weaken, with gold falling a further 2% on Friday.