Around May 4, 2026, the timeline originally written in countless research reports was suddenly crossed out. Nearly everyone was focused on the same answer—September 2026, the Federal Reserve cuts rates by 25 basis points for the first time, and then enters a mild rate-cutting cycle. This was the "script" that many institutions, including Barclays, have repeatedly emphasized. But within just a few days, Barclays completely overturned its prediction: it no longer expected a rate cut in September and directly changed its stance to "maintaining interest rates unchanged for the entire year of 2026." From the schedule to the baseline scenario, this institution completely erased the so-called "first cut" from the agenda.

Almost simultaneously, the signals coming from within the Federal Reserve were no longer reassuring. Minneapolis Fed President Kashkari spoke out, reminding the market to maintain an open mindset regarding the future path of interest rates—one that is not only open to rate cuts but also in some cases "may require an increase in rates." He mentioned that if the war drags on, inflationary pressures will increase; even if the war ends immediately, it will take months for supply chains to recover, and he also discussed the hope for cooperation after the confirmation of the "Wosh" nomination. This series of statements shattered the market narrative that was originally centered around "the September rate cut": interest rates might stay high for longer, and the tail risk of rates rising again was back on the table. Under such conditions, including cryptocurrency assets, risk assets faced the question of whether to continue betting on "delayed easing" or to reprice for a longer period of high interest rates or even rate hikes. This question mark would become a reality the market had to confront.

The Disappearance of the September Rate Cut: Barclays Turns Around

Just as the market was grappling with whether to prepare for a longer period of high interest rates, Barclays tore up its own timetable. Previously, along with most institutions, it had included "a 25 basis point rate cut in September 2026" in its baseline scenario: it was not just a number, but more like a calendar for everyone to see—by that day, a loosening of policy would likely be officially underway. Now, the latest view outright invalidates this calendar: for the entire year of 2026, interest rates will remain at current levels, with no anticipation of any rate cut in September.

For institutions and retail investors betting on the "September rate cut trade," this was not just an ordinary research report revision, but a dismantling of the entire hypothesis chain. The original trading logic was built around "September as a policy turning point": some added duration early, some bet that the interest rate curve would start reflecting easing expectations before then, and others meticulously aligned the rebound timeline of risk assets like cryptocurrencies to that period. Barclays' abrupt turn was akin to drawing a slash with a red pen on the blueprint—it told you that the vacant "rate cut" box was gone, and high rates might persist until the end of the year, or even longer.

More subtly, this revision did not come with a sufficiently clear, cross-validated "reason." The briefing itself pointed out that, according to current publicly available information, there is no authoritative explanation for why Barclays rewrote "a 25 basis point rate cut in September" to "no changes for the entire year," and we cannot simply attribute this decision to any single variable change. For investors, this means two layers of uncertainty: one layer is the path itself—the rate cut timetable has been postponed or even erased; the other layer is the gap in logic—we temporarily cannot see the main reasons driving the path change. Under such dual uncertainties, the market should not rush to craft a story about Barclays' turn but rather acknowledge that even a seemingly solid anchor point like "September" can be uprooted overnight.

Kashkari Turns Hawkish: The Topic of Rate Hikes Returns

Just as Barclays uprooted the "September rate cut" anchor, Kashkari straightforwardly brought another possibility back to the table. He publicly reminded the market, "We need to keep an open mindset regarding future interest rate policy... The longer the war lasts, the more inflationary pressures increase, and in some cases, we may need to consider raising rates." The impact of this statement lies not in the immediate forecast of rate hikes but in rewriting the boundaries of discussion—where the market was previously just oscillating between different versions of rate cut paths, it is now forced to incorporate "rate hikes again" as a tail risk into its models. The uncertainty of the path has been deliberately linked to the chain of geopolitical conflict and price pressures: it's not that inflation is just slowing down a bit naturally; rather, as long as the war drags on long enough, monetary policy must retain the option to add more stimulus.

Even more worrisome is that what he attempted to depict was not a short-term shock that could be soothed by "a ceasefire brings a bottom." According to currently available single-source reports, Kashkari added, "Even if the war ends completely now, supply chain recovery will take months." If this statement is true, it means that from his perspective, the shock itself has an unavoidable lag, and the stickiness of inflation is not entirely controlled by the progress of the war. The same source also mentioned that he expressed "hope for cooperation after the confirmation of the 'Wosh' nomination and is open to some concerns expressed by 'Wosh.'" These details regarding the time for supply chain recovery and personnel coordination currently lack multi-source verification, but they at least signal one thing: the discussions around the decision-making table are not just about a few numbers on a dot plot but about how to redefine the interest rate ceiling amidst geopolitical uncertainty, supply chain delays, and internal policy disagreements. For investors, the return of the rate hike discussion is not just a verbal "hawkish" remark, but raises the entire upper limit of risk scenarios.

War and Supply Chains: The Stone Pressing Down on Inflation

As the discussion about interest rates rises again, another substantial weight on the table actually comes from war and shipping routes. Long-term conflicts will not just remain in the headlines; they will press down on final prices layer by layer through three channels: energy, raw materials, and transportation costs: a slight increase in energy prices will be passed on to the pricing by refining companies and electric utilities; raw material disruptions mean businesses will either scramble for goods or change formulations, with rising costs being written into a new round of contracts; shipping and insurance cost increases will directly reflect on the landing prices of cross-border goods. Kashkari puts it very bluntly—"The longer the war lasts, the greater the inflationary pressures; in some cases, we may even need to reconsider rate hikes"—which serves as a reminder to the market: geopolitical conflict is not just background noise but a possible "front stage factor" that could push the entire price level higher.

More complicated is the time lag. Kashkari added that even if the war were to end completely at this moment, supply chain recovery would still take months. This assertion is currently only from a single source, but it does not conflict with past experience: rerouting shipping lines, port congestion, and companies re-signing long-term contracts cannot be restored overnight. Even if geopolitical tensions suddenly ease, lower upstream prices must go through inventory digestion, price adjustments, and then pass through to the end, leading to a lag that makes inflation's "stickiness" stronger—the data may no longer spike, but the slope of the decline has been extended.

In such a macro environment, the previously clear narrative of "September rate cut" naturally begins to loosen. Geopolitical tensions and slow supply chain recovery add an unpredictable tail to the inflation decline, eroding the market's confidence in a swift and clear rate cut path. It is important to emphasize that there is currently no multi-source evidence showing that Barclays' adjustment of its interest rate forecast was due to these considerations; it seems more in line with Kashkari's warning as part of the same backdrop: under the assumption of potentially more stubborn inflation, any optimistic timetable regarding interest rates must be reassessed.

The Shift from Rate Cut Trades to a High-Interest Rate Norm

When Barclays wrote no rate cuts for the whole year into its baseline scenario and Kashkari presented that "in some cases there may need to be rate hikes," the market was forced to acknowledge that it might not be on a downhill path toward easing, but rather on a high-level plateau. Discount rates are no longer seen as a "temporary peak that will come down sooner or later," but rather as a potential fixture for several quarters or even longer. This means that the pricing framework of traditional assets established in previous years must be revamped: equities need to be recalculated for future cash flows using higher, more enduring capital costs; credit assets need to reassess how much of the spread is true risk compensation and how much is merely a premium for a "rate cut story" that has already failed.

From historical experience, whenever the narrative of "rate cuts are on the horizon" is debunked, the typical pattern for risk assets is that the segments with the most optimistic expectations and the longest durations are the first to be passively hit: those high-growth stories built on low interest rates and low discount rate assumptions are forced to reduce their valuation assumptions first; assets focused on leveraged exposure often undergo concentrated liquidation due to raised margin requirements and amplified volatility. Cryptocurrency assets in such macro shifts often bear a dual role: on one hand, they are included in the "liquidity trading basket," enjoying liquidity premiums when expectations for rate cuts rise; on the other hand, when rate cuts do not materialize and funding costs remain high, these premiums can be rapidly stripped away, with leverage funds preferring to exit first from the most volatile assets and those with the highest refinancing costs, in order to compress overall risk exposure.

As the market gradually accepts the narrative of "a high-interest rate norm," funding behavior will also undergo more structural adjustments: risk preferences will shift from chasing long-term stories to valuing current cash flows and balance sheet resilience; leverage usage will change from "how to amplify long positions" to "how to shorten financing chains and reduce triggering points for forced liquidations"; duration allocations will transform from outright bets on long-term interest rate declines to a more neutral or even short structure, incorporating the risks of rising interest rates into daily scenario simulations. The extension of the high-rate clock by Barclays and Kashkari's reminder of the tail risks of rising rates, when combined, effectively tell the market: transitioning from betting on "when to cut rates" to becoming accustomed to "interest rates remaining high" is a collective reformation regarding time value, discount rates, and risk tolerance, and this reformation rarely maintains gentleness towards the volatility of risk assets.

The Ghost of Rate Hikes Lingers: How Will the Crypto Market Respond?

At the watershed of May 2026, Barclays shifted from "a small rate cut in September" directly to "no cuts for the entire year," while Kashkari presented that "there may need to be rate hikes in some cases." These two voices, which were originally considered noise, made edits to the same narrative just months before September, which was initially mythologized as a "policy turning point"—interest rates won't go down, and there might even be a tail risk of rising rates. This rewriting of the narrative for liquidity-dependent cryptocurrency assets is not just a parameter change in the discount rate but a tightening of the entire risk imagination: all straightforward scripts that posit "rate cuts will naturally elevate risk appetite" must be reassessed.

For cryptocurrency investors, the coming battleground is not on price charts but in the flow of macro information. First, the subsequent public speeches from Federal Reserve officials will determine whether Barclays' "no cuts for the entire year" forecast is an anomaly or an emerging consensus; whether Kashkari is echoed by more colleagues will directly affect the market's pricing of the likelihood of further rate hikes. Second, every release of inflation and employment data will become a checkpoint for testing the "high-interest rate normalization" hypothesis—if data repeatedly reminder that inflation decline is not linear, those initially hopeful for a September or even earlier easing must push their timetables forward. Looking further out, the mentioned geopolitical tensions and slow supply chain recovery suggest that even if the war were to end suddenly, inflation decline might lag behind the conflict itself, leading to an extended high-interest rate clock, which continues to pressure the valuation and funding costs of high-volatility assets like cryptocurrencies. Under such uncertainty, a more rational option is not to go all-in on a single "rate cut story" but rather to place positions across multiple scenario simulations: setting up pathways for "no cuts for the entire year," "minor additional rate hikes," "unexpected earlier easing," corresponding to different position sizes, leverage limits, and holding periods, writing risk budgets in advance, rather than passively bearing the costs of one's own imagination after a narrative reversal.

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