Wall Street Bets on Fed Rate Hike: Here's What It Means for Bitcoin, Bonds and Trump

The CME FedWatch tool pegs the odds of a Federal Reserve rate hike on Wednesday at 94.5%. Such a high figure implies broad market agreement on the likely result. If approved, this action would raise the federal funds rate to 3.75%-4%, up from the present 3.50%-3.75% band, representing the first hike since 2023.

This expectation is driven by inflation metrics that remain stubbornly above the central bank’s mandate. The headline consumer price index stood at 3.4% on an annual basis in August, while core inflation hit 2.5%. These numbers sit above the Fed’s 2% goal. Disagreement among committee members surfaced in July, when the choice to keep rates steady was approved via a 9-3 vote, as three officials pushed for tighter policy then.

Outlook reports suggest the tightening phase will extend past Wednesday. Leading firms like Barclays, Citigroup, JPMorgan, Morgan Stanley, and UBS anticipate a cumulative reduction of 50 basis points in total tightening by year-end. A more aggressive stance comes from Bank of America, Deutsche Bank, and RBC, which predict 75 basis points of cumulative rate increases.

Fixed-income traders have already priced in this path. The 10-year Treasury yield hit 5.04% this week, topping levels last seen in July 2007. Bitcoin, selling for roughly $75,700 on Tuesday following a 3.2% drop, now trades significantly under its September high of nearly $82,000. Charts indicate that a daily close under $73,200 could trigger a slide to $71,000, or even $66,900. The Fed’s ruling and Kevin Warsh’s ensuing press conference will reveal if the market’s assumption of a single hike matches the committee’s long-term view, a gap that dictates how much further risk assets must be repriced.