US economists lowered their recession odds to 25% while raising inflation forecasts, according to a Wall Street Journal survey, leaving the Federal Reserve little room to cut interest rates this year.

The shift matters for crypto markets. A higher-for-longer Fed removes the catalyst that risk assets had counted on for a second-half recovery.

Survey Points to Sticky Inflation and a Cautious Fed

The July survey of 72 economists ran from July 2 to July 7. They cut recession odds to 25% from 33%, the lowest reading since early 2025. 

Job-market views improved too, with December unemployment seen at 4.3%. Furthermore, forecasters now expect the economy to grow 2.1% this year, up from 2% in April.

Nonetheless, inflation told a different story. Economists expect consumer prices to rise 3.4% through December, above April’s 3.2% estimate. Core PCE, the gauge Fed watches most closely, is projected at 3.2%.

“We’re learning that there’s more momentum in the economy: It keeps growing at 2% no matter what you throw at it, and inflation stays elevated,” Robert Fry, a Delaware-based independent economic consultant, said.

Why Rate Expectations Weigh on Bitcoin

Interest rates shape how investors treat risk. Lower rates cut returns on cash and bonds, pushing money into stocks and crypto. Higher-for-longer rates do the reverse.

When safe assets pay more, capital rotates out of volatile holdings first. Bitcoin (BTC) often sits near the front of that queue. A delayed cut, therefore, removes a key support.

Traders have turned more hawkish this week. CME FedWatch shows a 34.2% chance of a hike at the July meeting, up from 18.2% a week ago. Renewed US-Iran hostilities have fueled those bets.

The Fed’s June minutes reinforced the divide. Officials voted unanimously to hold, yet split on the path ahead. Nine of 18 policymakers projected one hike before the end of 2026.

Several flagged inflation risks are tied to spending on artificial intelligence (AI). The next Federal Open Market Committee (FOMC) meeting is scheduled for July 28 and 29. 

Given persistent inflation, a rate cut looks unlikely. Cooler data must now do the work of reviving risk appetite.

Source: BeInCrypto