Fed Rate Hike Looms as Core Inflation Drops to 3%

The upcoming Federal Reserve policy decision on September 16 is expected to have significant implications for risk assets, including Bitcoin. According to Fed funds futures, there's a 60-66% probability of a 25 basis point rate hike at the meeting.

This would be the first increase since 2023 and could send shockwaves through the cryptocurrency market, which is already feeling the weight of shifting rate expectations. The current federal funds target range sits at 3.50%-3.75%, held steady after the July 28-29 meeting on a 9-3 vote.

The inflation picture has improved, with core CPI cooling from 4.76% to roughly 3% territory, but markets aren't celebrating. Instead, they're pricing in a rate hike, which would strengthen the dollar and push up real yields, potentially pulling capital away from assets like Bitcoin that don't generate income.

The September meeting also brings an updated Summary of Economic Projections and the infamous dot plot, where individual Fed officials signal their rate expectations. If those dots shift meaningfully higher, markets will need to reprice not just September but the entire rate path through 2027.