Bitunix Analyst: Market's Real Concern is Not Rate Cuts, but Fed's Acceptance of 'Long-Term High Rates'

04/29 10:20

On April 29, the market has almost fully priced in the Federal Reserve's decision to keep interest rates unchanged, shifting the real focus to another issue—whether the Fed is reconsidering the option of raising rates again. This explains why recent long-term U.S. Treasury yields have approached 5% again, leading to large-scale bets on a decline in long bonds. Over the past two years, the Fed has consistently viewed energy prices, tariffs, and supply chain disruptions as 'one-off inflation,' so even with fluctuations in oil prices, the market still believes it can eventually return to a rate-cutting cycle. However, now that the Middle East conflict has entered its third month, Brent crude oil has risen about 50% since the outbreak of the conflict, and there are growing internal doubts within the Fed: if one-off shocks keep recurring, can they still be considered one-off? This is the real risk tonight. The market is not worried about an immediate rate hike from the Fed, but whether Powell will formally acknowledge that high oil prices and supply chain issues may be seeping back into core inflation. If the Fed begins to accept this logic, it would mean that 'maintaining high rates for longer' will become the market's main narrative again. More critically, this meeting may also be Powell's last as chair of the FOMC. Trump's nominee Kevin Warsh is nearing the completion of the confirmation process, and Warsh himself is a typical hawkish figure. If Powell ultimately resigns from his board position as well, Trump will be closer than ever to reshaping the power structure of the Fed. Therefore, what the market is actually trading now is not whether there will be a rate cut tonight, but how the 'next Fed' will redefine inflation and interest rates. This is also the core reason behind the recent high volatility in the dollar, U.S. Treasury yields, and gold. For the cryptocurrency market, BTC is currently benefiting from the influx of funds into risk assets and ETF demand, but if the Fed starts signaling that 'rate hikes are not off the table,' both high-valued tech stocks and the crypto market may face renewed liquidity pressures. The real short-term observation should not be the rates themselves, but whether Powell is willing to reopen the door to 'rate hike expectations' for the market.

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