Only weeks ago, the interest rate debate in the U.S. centered on just how many Federal Reserve rate cuts there would be in 2026. But as the economy shows only faint signs of slowing, inflation remains above the central bank’s 2% target, and oil prices are up 50% in three weeks, rate traders are beginning to contemplate a rate hike as soon as April.
According to CME FedWatch, the chances of the Fed tightening policy at its next meeting in April have risen to 12%. That’s up from 0% one week ago and an even sharper reversal from two months ago, when the conventional wisdom said a rate cut was likely that month.
February data showed annual headline inflation running at 2.4% and core at 2.5%. And those numbers were prior to the Iran war and subsequent 50% surge in oil prices.
The long end of the bond curve has sold off sharply alongside, with the 10-year U.S. Treasury note up another 10 basis points on Friday to 4.38% versus under 4% at the start of March.
The bond selloff is global. In the U.K., 10-year gilt yields have jumped above 5%, up 15% in the past month, and are at their highest since 2008.
Bitcoin ahead of the curve?
The major stock market averages haven’t made any loud moves since the war began, but the selling is beginning to add up. Down another 0.9% today, the S&P 500 is on track for a fourth straight weekly decline and now lower by more than 5% since late February. The Nasdaq is down similarly, including a 1.2% drop on Friday.
Precious metals — which ran massively higher in the weeks ahead the war — have sold off since. Trading at about $5,500 per ounce at the start of the month, gold on Friday was priced at $4,569. Silver has crumbled to $69.50 per ounce from $95.
“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 a recession, while many traditional assets are not,” he added.
Bitcoin continues to hover around $70,000, and — up modestly since the start of March — remains one of the best-performing assets since the war began.