Fed Rate Hike Odds Soar to 87% as Inflation Concerns Grow

The Federal Reserve is gearing up for its September meeting, and markets are now giving an 87% chance of a rate hike. This marks a significant shift from just a day earlier when the odds stood at 72%. The Fed currently has its target rate at 3.50%-3.75%, and economists believe that higher rates could have far-reaching implications for the crypto market.

Earlier, most economists had expected the Fed to keep rates unchanged due to easing inflation and upcoming U.S. midterm elections. However, hotter-than-expected August CPI numbers have changed this outlook, with chief economist Heather Long stating that a September hike is 'almost locked in'. The risk of inflation remaining high continues to grow, with former Fed Vice Chair Richard Clarida adding that if a hike occurs next week, it would likely be followed by additional ones.

The shift towards higher rates has also led markets to expect at least three rate hikes through June 2027, up from two previously. This points to a 'higher-for-longer' rate outlook as investors prepare for the Fed to continue fighting inflation. For Bitcoin and other cryptocurrencies, this could mean reduced money flowing into these assets due to higher interest rates making safer investments more attractive.