Wall Street is bracing for the Federal Reserve to do something it has not done since 2023: raise interest rates.

The Federal Open Market Committee wraps up its two-day meeting on Wednesday, and CME's FedWatch tool, which derives its probabilities from federal funds futures pricing, puts the odds of a quarter-point hike at 94.5%, up from under 50% a month ago. If delivered, the move would push the federal funds rate — the overnight interbank rate that anchors short-term borrowing costs across the economy — to a target range of 3.75%-4%, from the current 3.50%-3.75%.

The shift from unlikely to near-universal happened quickly. A Wall Street Journal survey published this week found that nearly every major bank now expects a hike on Wednesday, with most — including Barclays, Citigroup, JPMorgan, Morgan Stanley and UBS — forecasting 50 basis points of total tightening by year-end. Bank of America, Deutsche Bank and RBC are more hawkish still, calling for 75 basis points of tightening this year.

Goldman Sachs sits at the dovish end of the hikers, penciling in just this week's quarter point and nothing more. Jefferies and Oxford Economics are the outliers, forecasting a cut in December and in 2027, respectively.

Higher rates make borrowing more expensive, which slows spending and weighs on assets that thrive on cheap money, such as stocks and Bitcoin. They also make safe government bonds pay better, pulling cash out of riskier bets. That said, the pressure is less about the hike itself and more about not knowing how many more are coming: markets dislike that uncertainty and are repricing now, before the Fed even speaks.

Why the Fed Is Moving

The case for a hike rests on inflation that will cooperate. Headline CPI, which includes food and energy, ran at 3.4% annually in August, with core inflation, which excludes them, at 2.5% — both comfortably above the Fed's 2% target. Oil prices, pushed higher by the ongoing conflict with Iran, have added a layer of price pressure that neither tariffs nor rate cuts can easily offset.

The Fed held rates steady at 3.50% to 3.75% in July, but that decision passed by just a 9-3 vote of the committee's 12 voting members, with three policymakers already pushing for a hike at the time. That internal split, combined with a stronger-than-expected August jobs report, tilted the committee toward tightening heading into this week.

A Political Collision Course

The expected hike puts Fed Chair Kevin Warsh in an uncomfortable spot. President Donald Trump handpicked Warsh for the job in January and, at his swearing-in in May, urged him to be "totally independent" while making clear he expected lower rates. That has not happened — at least not by what Trump expected "totally independent" to mean.

Trump, Vice President JD Vance and Treasury Secretary Scott Bessent have all publicly pushed for cuts over the past two weeks, with Trump going as far as threatening to halt trade with countries running surpluses with the U.S. if rates do not come down. Warsh has said the president has had no influence on Fed decisions.

The hike would land two months before the November midterms, where polls already show voters frustrated with high prices and borrowing costs — and it is arriving in part because of the tariff and Iran-conflict policies Trump himself has championed.

Bond Markets Have Already Moved

Bond markets have not waited for Wednesday. The 10-year Treasury yield — the benchmark that underpins mortgage rates and corporate borrowing costs — touched 5.04% this week, its highest level since July 2007, as traders priced in both the hike and a longer stretch of elevated rates. The two-year yield, which is more sensitive to Fed policy, hit its highest level since July 2024.

Higher yields make Treasurys more attractive relative to risk assets and tend to strengthen the dollar — a headwind for assets like crypto that benefit from cheap money.

What It Means for Bitcoin and Altcoins

Crypto is walking into the decision already bruised. On Tuesday, Bitcoin changed hands at around $75,700, down about 3.2% on the day after the Clarity Act — crypto's long-awaited market structure bill — failed its Senate cloture vote, the procedural step needed to advance a bill toward final passage. Bitcoin is now well off its September peak near $82,000.

At $73,200, BTC appears to face a line in the sand: a daily close below that level opens the door to $71,000 and even $66,900 based on technical indicators, effectively erasing the price surge that also produced Bitcoin's current golden cross — a pattern formed when a shorter-term moving average crosses above a longer-term one and is typically read as a bullish signal.

Not everyone reads a hike as purely negative. Some analysts argue that a quarter-point move aimed mainly at anchoring long-term Treasury yields, rather than genuinely tightening financial conditions, could leave crypto's medium-term picture largely intact. What matters most, in that view, is whether the decision and Warsh's tone at the press conference surprise markets relative to what is already priced in.

Higher-beta altcoins are expected to see sharper percentage swings than Bitcoin either way, given thinner liquidity and heavier leverage.

What to Watch

The Fed's statement and updated dot plot — the committee's projections of where each official expects interest rates to head in the years ahead — are due at 2 p.m. ET Wednesday, followed by Warsh's press conference at 2:30 p.m. ET. Traders will be watching for whether officials still pencil in just one more hike this year, or something closer to the two additional moves that Bank of America, Deutsche Bank and RBC are now calling for.