Expert warns Federal Reserve may reverse rate cuts that stabilized economy

Thomas Garretson, senior portfolio strategist at RBC Wealth Management, warned on July 10 that the Fed is likely to reverse its 2025 rate cuts entirely. His forecast calls for either three rate hikes or a prolonged hold at current levels, effectively erasing the easing that markets had treated as a safety net.

The Fed’s quiet pivot

At the June 17 FOMC meeting, the Fed unanimously held its benchmark rate steady at 3.5% to 3.75%. What caught attention was the updated dot plot: the median projection for the federal funds rate by year-end 2026 jumped to 3.8%, up from 3.4% in March.

Garretson described the 2025 rate cuts as “insurance cuts,” precautionary moves designed to cushion the economy against downside risks that never fully materialized. With those risks fading and new inflationary pressures emerging, the insurance policy is getting canceled.

Markets currently assign roughly 78-79% probability that rates won’t change at the upcoming July meeting. But Garretson’s concern isn’t about next month. If three hikes materialize over the next several quarters, the federal funds rate could climb back toward 4.5% or higher. Garretson’s view is that markets are being too optimistic. Current pricing reflects only one hike in 2026.

Why inflation isn’t cooperating

Geopolitical tensions, particularly the ongoing Iran conflict, have pushed oil prices upward, feeding through to broader inflation metrics.

What this means for crypto

When Treasury yields rise, the opportunity cost of holding Bitcoin, Ethereum, or any other non-yielding asset goes up with them. A stronger US dollar, which typically accompanies rate hikes, adds another layer of pressure. Crypto is globally priced in dollars, so a strengthening greenback effectively makes digital assets more expensive for international buyers.

Traders should watch two things closely. First, the July FOMC statement and any language shifts around the balance of risks. Second, oil prices. If energy costs continue rising due to the Iran situation, the probability of Garretson’s hawkish scenario increases substantially. The market is pricing in one hike. If it gets three, the adjustment won’t be gentle.

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