The Federal Reserve's FOMC meeting on July 29 carries only a 29.4% implied probability of a rate hike, according to the CME FedWatch tool, but the more important read is the two-year Treasury yield, which has already pushed above the current Fed funds rate. The market is pricing the Fed funds rate to roughly 4.25% by December, the level the 2-year yield is already trading near, signalling that the committee is no longer in restrictive territory. Initial jobless claims just printed 187,000, the lowest in decades, while the unemployment rate has been trending down since November 2025, giving the Fed little obvious reason to cut further. Inflation cooled off the 4.1% peak but energy and labour conditions leave the door open for a tightening response.
Why it matters
The pattern of two-year yields leading Fed funds rate decisions is one of the cleanest monetary-policy signals on the chart. With the 2-year now above the policy rate, the bond market is effectively telling the Fed to hike. The Fed, which cut three times in both 2024 and 2025, has historically started cutting cycles in September rather than July, making a summer hike historically rare. Several banks have floated a July hike scenario, but the FedWatch pricing and the channel's read both lean toward a hold tomorrow with the move landing in September instead.
Market impact
The expected sequence is a Fed hold tomorrow, a bond vigilantes-led push that drives the 10-year yield toward 5% and the 30-year through 5.2%, a stock-market correction of 10-20% in the August-September window, and then one or two Fed hikes later in the year. Bitcoin historically bottoms in Q4 of midterm years, and a tighter policy backdrop supports that timing. Bitcoin dominance has held up, but only meaningfully once stablecoins are excluded; stablecoin dominance has roughly doubled since October 2025, from 6% to over 13%, masking the flight to safety underneath.
Frequently asked questions
-
Does the Fed raise rates at the July 29 FOMC meeting?
FedWatch pricing puts the probability at 29.4%, and the channel expects a hold. The historical pattern of September-start cut cycles in 2024 and 2025 makes a summer hike unusual.
-
What does the 2-year Treasury yield signal about the Fed?
The 2-year yield has already pushed above the current Fed funds rate and is trading near 4.1-4.2%. Fed funds futures price the policy rate at roughly 4.25% by December, suggesting the bond market wants the Fed to hike from current levels.
-
How do ultra-low jobless claims affect the Fed's rate decision?
Initial claims printed 187,000, the lowest in decades, and the unemployment rate has been trending down since November 2025. A tight labour market gives the Fed less justification to cut and more reason to lean hawkish.
-
What is the expected path for the 10-year and 30-year Treasury yields?
If the Fed holds rates, the channel expects bond vigilantes to push the 10-year yield back toward 5% and the 30-year yield through its 5.2% ceiling that has held since 2023.
-
When does Bitcoin historically bottom in a midterm-year cycle?
Bitcoin has historically bottomed in the back half of midterm years, typically in Q4. The expected 10-20% stock correction starting in August-September would precede that Bitcoin bottom, in line with prior cycles.
CryptoSlate
CoinTelegraph
CoinDesk
TheBlock
Glassnode
WatcherGuru
Crypto News