UBS now forecasts two Federal Reserve rate hikes this year, reversing its earlier call for no change, after a strong August jobs report. The shift pushes Bitcoin's macro headwind out to December, while CoinShares says a split among Fed officials over inflation versus jobs keeps the currency stuck in a range.
UBS Global Wealth Management now expects the Fed to raise rates by a quarter point in both September and December, Reuters reported Sept. 7 — a reversal from its prior forecast of no hikes at all this year. The bank cited strong August labor data, hawkish Fed communication and inflation risks from supply bottlenecks.
Bitcoin pays no contractual interest, so a higher chance of a rate hike raises its opportunity cost against interest-bearing dollar assets. Higher borrowing costs can also make leveraged positions harder to maintain.
Jobs data hardens the case for higher rates
Employers added 162,000 jobs in August while unemployment held at 4.1%, exceeding the average monthly gain of 31,000 over the prior year. Food services and drinking places added 59,000 jobs and local government education added 42,000, while information employment fell by 23,000.
As a result, futures now price in a roughly 58% chance of a quarter-point hike at the Sept. 15-16 meeting, up from 52% before the jobs report. Fed Governor Christopher Waller said continued progress on inflation could justify holding rates steady, but a hot August reading could push him toward a hike.
CoinShares sees a Fed split over inflation versus jobs
CoinShares head of research James Butterfill said Fed Chairman Kevin Warsh's hawkish comments moved markets toward pricing close to a two-thirds probability of a September hike, before Fed Governor Waller pushed back, arguing disinflation signs could support holding rates steady. The CME FedWatch Tool currently estimates a 60.4% chance of a 25-basis-point hike at next week's meeting.
Butterfill said Bitcoin needs either an Iran conflict resolution that lowers inflation and rate expectations, or a further deterioration in confidence in US sovereign debt to move convincingly through $80,000. Until then, he expects range trading to continue.
Inflation data due before the Fed decides
Bitcoin traded around $79,375 on Sept. 7, according to CryptoSlate data. Daily Hodl put the price at $79,337 at time of writing.
A 2023 IMF working paper found that Fed tightening reduced a common crypto price factor through weaker risk-taking, though the size of any 2026 response remains uncertain. UBS's December call also raises the stakes of next week's meeting, since markets weigh not just the immediate decision but the path of rates through year-end.
Sources: CryptoSlate, The Daily Hodl
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