Goldman Sachs Flips on Rate Hike, Sees Odds Shift for Bitcoin

Goldman Sachs has flipped its stance on interest rates and now expects the Federal Reserve to raise them in September. Just last month, Goldman was among the loudest voices calling for no rate hike. However, researchers led by chief U.S. economist David Mericle now predict a quarter-point increase when the Fed meets on Sept. 16. This would lift the federal funds target from its current 3.50% to 3.75% range.

Goldman is not alone in this new expectation, as JPMorgan, Citigroup, Mitsubishi UFJ, and TD Securities have all made similar predictions. The Wall Street Journal reports that investors are now almost certain of a rate hike next week, with attention shifting from the decision itself to what follows.

The August core consumer price index (CPI) inflation rose 0.3% month-on-month, which was higher than expected and swung market odds in favor of a rate hike. The CME's Fedwatch tool had the probability of a quarter-point increase at 69% immediately after the release, but this jumped to 86.5% by the end of the session.

Bitcoin's price has failed to break above $80,000 repeatedly this month, and each failure coincided with hawkish repricing. The path forward is more crucial than the rate hike itself, as officials believe a single 25-basis-point increase does little to curb inflation. A signal that current rates are too low may prompt further action from the Fed.

With the FOMC meeting just around the corner, market pricing has drifted toward 90% in favor of a quarter-point rate hike. The outcome is largely priced in, but what follows will be crucial for Bitcoin's price and the broader market.