Bitcoin Holds Gains as Fed September Hike Odds Rise

Bitcoin held modest gains on Saturday as futures priced roughly an 85% probability of a 25 basis-point Federal Reserve rate increase at the Sept. 15-16 meeting. The change in expectations followed the August consumer price index report.

The Bureau of Labor Statistics reported the consumer price index rose 0.4% in August on a seasonally adjusted basis after a 0.1% gain in July. The unadjusted 12-month inflation rate remained 3.4%. Gasoline prices jumped 3.9% and accounted for more than one-third of the monthly rise, while the broader energy index increased 2.1%.

Core CPI, which excludes food and energy, rose 0.3% in August after a 0.2% increase in July. Its 12-month rate edged down to 2.4% from 2.5%. Shelter rose 0.3% in August and services excluding energy were up 3.0% year over year.

After the report, fed funds futures implied about an 85% chance of a 25 basis-point hike at the Fed’s mid-September meeting, up from roughly 70% before the CPI release. Market participants placed weight on the monthly core reading even as the annual core rate eased.

Federal Reserve Governor Christopher Waller framed August’s report as central to his near-term decision and described his stance in a Sept. 3 speech as “a reaction function, not a commitment.” He noted that continued progress on the Fed’s 2% inflation goal would incline him to support holding the policy rate steady, while a hotter report could lead him to consider a hike. He highlighted renewed energy pressure and rising longer-term inflation expectations as risks.

The August report covered price changes in that month and did not include sharper oil-price moves that occurred in September. A sustained rise in oil prices could affect future CPI readings and inflation expectations.

Bitcoin traded near $77,500 on Saturday after small daily gains and showed increased intraday swings during thin weekend liquidity. Market data indicated an aggregate bitcoin market capitalization near $1.55 trillion, 24-hour volume around $14.6 billion, and a 24-hour price change of about +0.06%.