Fed Interest Rate Hike Expected to Boost US Dollar, Weigh on Bitcoin
US inflation data released last week has significantly impacted market expectations regarding the Federal Reserve's interest rate policy. The August Consumer Price Index (CPI) exceeded forecasts, with core inflation remaining strong. As a result, major banks and economists now predict that the Fed will raise its benchmark interest rate by 25 basis points at its upcoming meetings on September 15th and 16th.
According to HSBC US Economist Ryan Wang, 'Following the August employment report and CPI data that exceeded HSBC's expectations, we now expect the FOMC to vote for a 25 basis point rate hike at its September 15-16 meeting.'
The expected increase in interest rates would raise the benchmark rate from 3.50-3.75% to 3.75-4.00%. The majority of experts, including Goldman Sachs and JPMorgan, anticipate that the Fed will raise interest rates this week following the higher-than-expected inflation data.
UBS analysts, who previously predicted stable interest rates throughout 2026, now expect two 25 basis point rate hikes in September and December. The Reuters survey of 101 economists found that 86, or approximately 85%, predict a Fed rate hike at its meetings on the 15th and 16th.
The strengthening expectation of rising core PCE inflation and high energy prices is increasing concerns that monetary policy may tighten further. This could have significant implications for Bitcoin, with rising interest rates supporting the dollar and US bond yields, potentially reducing investor interest in risky assets.