Fed Hikes 25 bps, Markets Yawn: Bitcoin Shrugs at the Fed's Long-Awaited "Touchdown" 📉

The U.S. Federal Reserve raised its benchmark federal funds rate by 25 basis points to a target range of 3.75%–4.00% on Wednesday, marking the central bank's first rate hike since July 2023. The decision was unanimous, with all 12 voting members of the Federal Open Market Committee backing the move. The Committee said economic activity is "expanding at a solid pace" and that "inflation remains elevated," adding that "today's policy action will support a timelier return to the Committee's 2 percent goal."

Markets had largely anticipated the outcome. CME's FedWatch tool had priced a 93% chance of a hike ahead of the decision, up from under 50% a month earlier. The case for tightening hardened after August inflation data: the Producer Price Index rose 5.4% annually, accelerating from 4.8% in July, while the Consumer Price Index climbed 3.4% year-over-year, with the monthly gain accelerating to 0.4% from 0.1%. Core inflation also picked up to 0.3% monthly from 0.2%. Goldman Sachs and Piper Sandler, which had previously expected the Fed to hold, switched their forecasts to a hike after the reports landed. A Wall Street Journal survey found nearly every major bank expected tightening, with Barclays, Citigroup, JPMorgan, Morgan Stanley and UBS projecting 50 basis points of total tightening by year-end, while Bank of America, Deutsche Bank and RBC called for 75 basis points.

At his post-meeting press conference, Fed Chair Kevin Warsh said "the economy has indeed strengthened" and declared "inflation is the problem," adding "the plain fact is that inflation is too high and has been for too long." He declined to comment when asked about President Donald Trump's reaction to the decision, repeating his August Jackson Hole line: "We will deliver price stability. We're committed to a discipline, not a decision." On artificial intelligence, Warsh said the Fed would focus on AI's "implications on the demand side of the economy" rather than AI policymaking itself, consistent with five task forces he set up earlier this year.

The Fed's updated projections point to a median policy rate of 4.1% by the end of 2026, implying one more possible quarter-point increase, with inflation expected to average 3.7% in 2026, 2.3% the following year, and not returning to 2% until 2029. Warsh told reporters he was "not in the forward guidance business," but signaled financial conditions were not restrictive prior to the latest increase.

Crypto markets absorbed the decision without major disruption. $BTC swung between $75,000 and $75,800 around the announcement, spiked briefly to $76,000, and later traded near $75,500, down roughly 0.2% over 24 hours. $ETH remained nearly unchanged, while $SOL and $BNB saw slight losses and $XRP dropped more than 2%. The total crypto market capitalization, excluding stablecoins, stood at approximately $2.29 trillion, up 0.8% over 24 hours. The broader crypto market had earlier lost around 2.18% on the day before recovering.