U.S. factory input costs surge; markets watch Bitcoin near $85,000

The Institute for Supply Management on Oct. 1 reported the manufacturing prices index at 77.9 for September, up 6.8 points from August’s 71.1. The broader manufacturing PMI registered 54.5, with new orders at 55.3 and employment at 52.7. The prices gauge is a diffusion index that counts how many manufacturers reported higher input costs; 58.6% of respondents reported price increases in September, compared with 46.2% in August. The index does not represent a percentage inflation rate.

The Federal Open Market Committee raised its target range for the federal funds rate by 25 basis points to 3.75%–4% on Sept. 16. In remarks on Sept. 29, New York Fed President John Williams stated, “another upward adjustment might be appropriate late this year if the economy broadly followed his forecast.” He added there was “no evidence yet of the identified price shocks spilling into broader, more persistent inflation.”

Higher reported input costs are a factor the Fed will consider when setting policy, and policy decisions affect short-term borrowing rates and returns on Treasury bills. For Bitcoin, two channels are relevant: higher margin borrowing costs can increase the expense of leveraged crypto positions, and higher yields on dollar assets can raise the return investors demand from non-yielding assets such as Bitcoin.

Markets will focus on the Bureau of Labor Statistics’ Employment Situation report scheduled for Oct. 2 for national payrolls data. The ISM manufacturing employment reading covers factory jobs only and does not substitute for the national payrolls report.

Bitcoin traded near $84,700 on Oct. 1, up about 1.1% over the previous 24 hours.

A February 2023 New York Fed staff study found no consistent intraday Bitcoin response to monetary and macroeconomic announcements in its historical sample. Market moves will depend on whether investors change expectations for policy and short-term yields, and whether those changes affect financing costs for crypto positions.