Bitcoin Rises Despite Core Inflation Beating Expectations: Is the Fed’s Rate Hike Priced In?

Bitcoin rose despite core inflation exceeding expectations in the U.S.; markets may have largely priced in the Fed’s interest rate decision in advance.

While the U.S. Federal Reserve (Fed) is expected to raise interest rates next week, August data released did not create the expected pressure on Bitcoin. Core CPI rose 0.3% monthly, exceeding economists’ 0.2% forecast. In contrast, Bitcoin rose to $78,600 following the data and gained 1.5% in the last 24 hours.

Headline inflation also increased by 0.4% on a monthly basis and 3.4% on an annual basis. Both results were in line with expectations. Bank of America expects the Fed to implement a 25 basis point rate hike next week and an additional 50 basis points of tightening by the end of the year.

Markets may have priced in the Fed decision in advance

Joel Kruger, Global Markets Strategist at LMAX Group, stated that investors shifted toward rate hike expectations before the inflation data was released. According to Kruger, a significant portion of hawkish expectations may have already been reflected in prices. Therefore, the Fed making the expected rate hike may create limited movement in the markets.

The strategist said the real major move could be seen if the Fed does not raise interest rates. He noted that in such a scenario, the likelihood of risky assets giving a strong upward reaction could increase.

Matt Mena, Senior Crypto Research Strategist at 21Shares, stated that hot core CPI data is not automatically negative for Bitcoin. According to historical data shared by Mena, Bitcoin rose an average of 2.13% in the 30 days following core CPI announcements that exceeded expectations. Ethereum and Solana’s gains also indicated that investor interest in crypto assets has not completely withdrawn.

Inflation concerns supported Bitcoin and gold

Mark Connors, Chief Investment Officer at Risk Dimensions, did not explain the rise in Bitcoin and gold solely through interest rate expectations. Connors said that concerns regarding inflation, public debt, and trust in monetary policy also influenced investor behavior.

U.S. bond yields rose across the curve despite the Treasury increasing long-term bond buybacks. Connors stated that this shows investors are focusing not just on next week’s Fed decision, but on a broader policy credibility issue. In this environment, Bitcoin and gold were able to show resilience together against rising-yield bonds as alternative assets.