- Softer economic indicators have caused Goldman Sachs to pull back on expectations for a September Federal Reserve rate hike, potentially strengthening the outlook for bitcoin.
- Goldman now views a September increase as “very unlikely,” offering a possible boost to bitcoin as it continues to trade within a narrow range.
- Bitcoin was hovering around $63,500, up about 1% since midnight UTC. The cryptocurrency has remained confined to the $62,000-$66,000 range for more than a month.
- The bank’s updated forecast follows weaker retail sales and employment figures, along with moderating inflation, Goldman Chief Economist Jan Hatzius said, according to Bloomberg.
- Hatzius said Goldman expects inflation to continue easing as the year progresses rather than rebound, while arguing that markets remain too aggressive in their expectations for the Fed’s interest-rate path.
- Monetary policy has a direct impact on credit conditions and liquidity, which can influence investor appetite for risk assets such as bitcoin. Higher interest rates generally pressure cryptocurrencies, as seen during the Fed’s tightening cycle in 2022.
- Expectations for rate cuts, by contrast, can improve liquidity and risk appetite. The crypto market’s rebound following the Fed’s response to the COVID-19 crash in March 2020 demonstrated the potential effect of easier monetary conditions.
- CME FedWatch data showed traders assigning a 30.6% probability to a 25-basis-point rate hike in September, which would raise the federal funds target range to 3.75%-4%.
- Most market participants expect the Fed to keep rates unchanged, with the probability of a hike declining after recent inflation data showed prices continuing to cool in line with expectations.
Goldman Sachs Rules Out Near-Term Fed Hike as September Odds Fade
