Fed Yanks Rates to 4%, Bitcoin Shrugs Like It's Seen This Movie Before 🎬

The U.S. Federal Reserve raised its benchmark federal funds rate by 25 basis points on Wednesday, lifting the target range to 3.75%–4.00% from 3.50%–3.75% in the central bank's first hike since July 2023. The vote among the 12 members of the Federal Open Market Committee was unanimous, with the Committee's updated "dots" signaling one additional rate hike before year-end and a median policy rate of 4.1% by the end of 2026.

The FOMC's policy statement 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." Annual headline inflation has remained above 2% for more than five years, while core inflation, which excludes food and energy, has eased to 2.4%, its lowest level in five years. The Fed now projects inflation to average 3.7% in 2026, 2.3% in 2027, and not hit 2% until 2029.

Fed Chair Kevin Warsh, confirmed in May and now in his third meeting at the helm, framed the decision bluntly at his post-meeting press conference. "The economy has indeed strengthened," Warsh said. "Inflation is the problem." Asked about President Donald Trump's reaction, Warsh declined, repeating the line from his Jackson Hole keynote: "We will deliver price stability. We're committed to a discipline, not a decision." The August Producer Price Index rose 5.4% annually, accelerating from 4.8% in July, while the Consumer Price Index rose 3.4% annually with monthly gains accelerating to 0.4% from 0.1%, helped push holdouts Goldman Sachs and Piper Sandler to flip their forecasts to expect a hike. Traders had priced in a roughly 90–93% chance of the move via CME's FedWatch tool, up from under 50% a month earlier.

Bitcoin traded near $75,700 in the minutes around the decision, swung between $75,000 and $75,800, then spiked briefly toward $76,000 before settling around $75,500, down roughly 0.2% over 24 hours. $ETH was little changed, while $SOL and $BNB saw slight declines and $XRP dropped more than 2%. The total crypto market capitalization stood at about $2.29 trillion excluding stablecoins, up 0.8% over 24 hours. Markets are now pricing in roughly 75 basis points of further tightening over the next six months, with WTI and Brent crude trading above $100 a barrel amid Middle East tensions and the U.S. 10-year Treasury yield reaching 5%.