Goldman Sachs Forecasts Another Fed Rate Hike in October
Goldman Sachs now expects the Federal Reserve to raise interest rates by 25 basis points in October, reversing its earlier forecast of a September hike followed by a pause. The Fed has already lifted its benchmark rate to a 3.75%-4.00% target range and signalled that another increase could be needed this year.
Fed Chair Kevin Warsh said inflation remains too high and that the latest rate increase only removed some monetary accommodation. Markets are pricing a slightly above 50% probability of another 25-basis-point hike in October, according to CME FedWatch.
The prospect of higher US interest rates is a potential headwind for risk assets, including Bitcoin. Bitcoin was trading near $76,260, up about 0.5% over 24 hours. Traders may watch October rate expectations, US inflation data and Treasury yields for signals on the next move in BTC.
Bearish
The news is bearish for crypto in the short term because Goldman Sachs now expects another Federal Reserve rate hike, while Fed officials have maintained a hawkish stance on inflation. Higher interest rates generally increase the appeal of cash and US Treasury assets, raise funding costs and reduce liquidity available for speculative assets such as Bitcoin.
The market impact may be limited initially because traders are already pricing a slightly above 50% chance of an October hike. Bitcoin was still modestly higher at about $76,260, suggesting that some of the news may already be reflected in prices. A stronger-than-expected inflation reading, rising Treasury yields or a further increase in rate-hike odds could nevertheless trigger selling, leverage reduction and greater volatility across crypto markets.
Similar hawkish Federal Reserve signals in previous tightening cycles have often pressured Bitcoin and other high-beta assets, particularly when yields rose quickly. Over the longer term, a sustained restrictive policy could delay crypto liquidity inflows and weaken risk appetite. However, if inflation cools or economic data softens enough to revive expectations of future rate cuts, the negative effect could fade. Traders should monitor BTC support levels, open interest, funding rates, the US dollar and Fed pricing for confirmation.