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CME Fed funds futures put the probability of a September interest rate increase at 58% as of Monday, well below the 90%-or-higher threshold that typically marks a hike as a done deal. The print follows Fed Chair Kevin Warsh's hawkish Jackson Hole remarks on Friday, which initially dragged Bitcoin down 3% to under $77,000 and pushed gold lower as Treasury yields and the Dollar Index climbed. Multiple analysts now argue the pullback was overdone and that BTC has room to extend its 23% August rally.
Why it matters
The threshold for the Fed to validate market expectations rather than surprise them sits somewhere between 60% and 70%, per the CME FedWatch tool. A 58% read is a lean, not a lock. Jim Bianco of Bianco Research framed it bluntly on X: "The next Fed meeting is a lean hike not a done deal." ABN AMRO Investment Solutions and Brandywine Global have taken similar positions, and Robin Brooks, senior fellow at the Brookings Institution, advanced a more structural read.
Warsh's concerns were narrow. He flagged the Fed's preferred PCE gauge at 3.7%, well above the 2% target, and noted that over half of tracked goods and services saw price increases of 3% or higher in the past year, versus roughly a third in the two decades before the pandemic. The current benchmark range sits at 3.5% to 3.75%, leaving limited room for an aggressive tightening cycle even if September delivers a hike.
Market impact
Brooks argued any September hike would be performative, aimed at anchoring the 10-year Treasury yield and avoiding a repeat of the post-July 29 bond sell-off rather than delivering genuine tightening. Such a move would actually keep financial conditions loose, which is the bullish scenario for hard-asset holders.
Bitcoin had rallied from roughly $63,000 to over $80,000 earlier this month before Friday's pullback, with August posting a 23% gain. Gold added 10% over the same window. With the Fed unlikely to deliver a tighter-than-expected shock, the path of least resistance for both remains higher.
Frequently asked questions
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What did Fed Chair Kevin Warsh say at Jackson Hole?
Warsh said inflation data "are more concerning" than labor market trends and pointed to PCE inflation at 3.7%, well above the Fed's 2% target. He noted over half of tracked goods and services saw 3%+ price increases in the past year.
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What does CME FedWatch say about a September rate hike?
CME Fed funds futures put the probability of a September rate hike at 58% as of Monday. The threshold above which the Fed tends to validate market expectations sits between 60% and 70%.
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How did Bitcoin react to Warsh's Jackson Hole remarks?
Bitcoin fell 3% to under $77,000 on Friday, marking its first notable pullback after rallying from roughly $63,000 to over $80,000 earlier in August.
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Why do analysts think September rate hike fears are overblown?
Analysts including Jim Bianco, ABN AMRO, and Brandywine Global argue the 58% probability is a lean, not a lock. Robin Brooks adds that any hike would likely be performative tightening aimed at capping 10-year yields rather than choking the economy.
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What does a performative Fed rate hike mean for markets?
Per Robin Brooks, a performative hike would signal Fed credibility on inflation while keeping financial conditions loose. That dynamic would actually support hard-asset prices like Bitcoin and gold rather than weighing on them.
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