Bitcoin has experienced sharp fluctuations in the past week. Having started September at around $78,000, BTC surged above $82,000 during the week, reaching its highest level since May. However, it couldn’t maintain these levels and fell back below $80,000.
The volatility in Bitcoin is particularly attributed to strong US employment data and expectations that the Fed may raise interest rates, with the likelihood of a Fed rate hike in September increasing further.
At this point, two prominent figures have offered important assessments regarding interest rates.
UBS Expects Two Interest Rate Hikes from the Fed!
According to Reuters, UBS predicts the Fed will raise interest rates by 25 basis points each month, in September and December.
UBS previously predicted that the Fed would not make any changes to monetary policy throughout 2026.
Strong Employment Data Changes Expectations!
UBS stated that the change in interest rate expectations was influenced by strong employment data released in the US. UBS analysts also pointed to Fed Chairman Kevin Warsh’s hawkish messages at the Jackson Hole meeting and the risks of supply-side inflation. These developments, they said, strengthened the expectation that the Fed may raise interest rates again.
UBS Global Wealth Management said in a recent note, “Hawkish statements, particularly (Fed Chairman Kevin) Warsh’s Jackson Hole speech, rising supply-side inflation risks, and August labor market data, were strong enough to change this forecast.”
Goldman Sachs Points to Friday!
Ahead of the Fed’s September meeting, investment bank Goldman Sachs released an important assessment.
Goldman Sachs, evaluating the August employment report, stated that non-farm payrolls exceeded expectations and that figures for the previous two months were also revised upwards.
However, Goldman Sachs stated that the strong employment data released in the US in August alone is not enough to warrant a Fed interest rate hike at its September meeting. According to the bank, the main indicator that will determine the Fed’s decision will be the inflation data.
At this point, attention is focused on inflation data, and according to Goldman Sachs, a moderate US CPI figure to be released on Friday, September 11th, could support a scenario where the Fed leaves interest rates at current levels in September. Conversely, higher-than-expected inflation could strengthen expectations of an interest rate hike.
Probability of Interest Rate Hike in September is 60%!
According to CME FedWatch data, markets are pricing in a 25 basis point interest rate hike by the Fed at approximately 60.4 percent at its September meeting. The increase in the probability of a rate hike following strong employment data indicates that investors’ expectations for the Fed’s September meeting have become more hawkish.
What Will Be the Impact on Bitcoin?
The Federal Reserve’s interest rate decision stands out as a critical macroeconomic indicator for the direction of Bitcoin. A rate cut could increase liquidity and risk appetite, creating upward pressure on Bitcoin, while a rate hike or hawkish messages could lead to a strengthening of the dollar and a move away from risky assets by investors. In this context, markets will closely follow not only the interest rate decision but also the messages the Fed will give regarding the coming period.
*This is not investment advice.
