Fed Rate Hike Odds Rise to 85%, Bitcoin Holds Steady Amid Mixed Inflation Signals

Crypto markets are navigating mixed signals after August's inflation report left the Federal Reserve with a conditional case for a rate hike in play. Bitcoin (BTC) held its daily gain, with prices up 2.08% over 24 hours when trading closed in the US on Friday.

The FedWatch probabilities, derived from 30-Day Fed Funds futures, showed an increased likelihood of a quarter-point increase at the September 15-16 meeting, rising to about 85% from around 70% before the inflation report. This move reflected traders' weight given to renewed energy pressure and possible rises in longer-term inflation expectations.

August's inflation report highlighted a split between annual core inflation, which eased to 2.4%, and monthly core inflation, which accelerated. Federal Reserve Governor Christopher Waller described this as his conditional case for a rate hike, saying continued progress toward the Fed's 2% goal would incline him to support holding the policy rate steady.

Waller also noted that core inflation was useful for seeing through energy volatility and that broader spillovers from earlier energy increases had not appeared so far. However, he identified renewed energy pressure and possible rises in longer-term inflation expectations as risks the Fed should watch.