Federal Reserve's Hawkish Shift Raises Rate Hike Odds, Hits Crypto Liquidity

The U.S. Personal Consumption Expenditures (PCE) price index rose 0.4% in May, matching April and marking the fastest monthly gain in three years; on an annual basis the index was up 4.1% and core PCE rose 3.4%.

Federal Reserve officials, led by new chair Kevin Warsh, removed any easing bias and pushed the median 2026 rate outlook to 3.8% from 3.4%, lifting the odds of at least one rate hike this year to about 77% and signalling a firmer stance on inflation.

Wintermute, a crypto market‑maker, warned that the tighter monetary outlook would curb key liquidity channels into digital assets, including ETFs, stablecoins and corporate treasuries. The resulting liquidity squeeze contributed to long liquidations of roughly $600 million, with Bitcoin falling about 3.8% to the low $60,000 range and Ether slipping below $2,000.

Meanwhile, oil prices eased as expectations grew for the Strait of Hormuz to reopen, pulling Brent crude down to around $72 a barrel. Geopolitical tensions involving Iran and Israel were noted but were secondary to the Fed‑driven market dynamics.