Last week, data on the US Consumer Price Index (CPI) was published. The August US CPI exceeded expectations, and specifically, the persistence of core inflation changed expectations regarding the Fed's interest rate policy.
The August data exceeded expectations. This increased the probability of a Federal Reserve interest rate hike at the September 15-16 FOMC meetings to over 85%.
Given that inflationary pressures in the US have proven stronger than expected, the overwhelming majority of experts predict that the Federal Reserve will raise its benchmark interest rate this week for the first time in over three years.
At this stage, US banking giant HSBC revised its previous forecast of no change in the interest rate, now predicting that the Fed will raise interest rates by 25 basis points each time in September and December 2026.
HSBC's US economist Ryan Wang stated: 'Following the release of the stronger-than-expected August employment report and CPI data from HSBC's perspective, we expect the Federal Open Market Committee to vote for a 25 basis point interest rate hike at its September 15-16 meeting.'
This move would raise the interest rate to 3.75-4 percent.
Wang continued: 'We believe the new FOMC "dot plot" could indicate a median forecast of 4.125 percent by the end of 2026.' Accordingly, HSBC expects a second 25 basis point rate hike at the October 27-28 or December 8-9 meetings.
Wang added that, given the resilience of the US economy's momentum, HSBC does not expect a quick return to interest rate cuts following the planned rate hike at the end of this year. HSBC forecasts that the funds rate will remain at 4-4.25 percent throughout 2027.
Analysts from Goldman Sachs and JPMorgan also stated they expect the Fed to raise interest rates this week following the release of inflation data that exceeded expectations. Additionally, analysts at UBS, who previously predicted the Fed would keep interest rates stable throughout 2026, announced they now expect two 25 basis point rate hikes in September and December.
Expectations for a Fed Rate Hike Have Strengthened!
Following the inflation data release on the 11th, Reuters conducted a survey of 101 economists. According to the Reuters poll, 86 economists, or approximately 85 percent, predicted that the Fed would raise its benchmark interest rate by 0.25 basis points at its September 15-16 meetings.
If the forecast proves correct, the benchmark interest rate will rise from the current 3.50-3.75% to 3.75-4.00%. This would be the first Fed interest rate hike since July 2023.
These results indicate a shift in market expectations. Last week, more than two-thirds of economists expected interest rates to remain unchanged, but these expectations changed after the strong inflation data was published. The CME FedWatch tool now estimates the probability of a Fed rate hike at 88.5%.
Furthermore, more than half of the economists surveyed stated they expect at least one more interest rate hike by March 2027. Expectations for rising core PCE inflation, the Fed's preferred inflation gauge, and high energy prices heighten concerns about the potential for further monetary policy tightening.
What Impact Could This Have on Bitcoin?
Strengthening expectations for a Federal Reserve interest rate hike can be viewed as a negative event for Bitcoin in the short term. Rising interest rates support the dollar and US bond yields, potentially reducing investor interest in risk assets. This could create selling pressure on Bitcoin.
In particular, the strengthening expectation that the Federal Reserve may raise interest rates several times by the end of 2026 could lead to increased volatility and short-term corrections in Bitcoin.
*This is not investment advice.
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