Fed Raises Rates for First Time Since 2023 as Bitcoin Shrugs It Off

On September 16, the Fed raised its benchmark rate for the first time since 2023, adding 25 basis points to bring it into a 3.75-4% range. All 12 committee members backed the decision unanimously, even though traders had priced in less than a 50% chance of a hike just a month earlier. Bitcoin barely reacted, briefly touching $76,000 before settling back down.

How big was the Fed's move?

The Federal Reserve raised rates by a quarter point, to a range of 3.75-4% from the previous 3.50-3.75%. It is the first hike since 2023, and it landed almost exactly where markets expected. According to CME's FedWatch tool, traders had priced in a 93% probability of the move, up from under 50% a month earlier.

All twelve members of the Federal Open Market Committee voted for the hike. In its statement, the committee said economic activity was "expanding at a solid pace" and that job gains had "kept pace with the workforce," though inflation remains elevated. The move, it said, should support a timelier return to the 2% target.

Why did the Fed suddenly start raising rates?

Back in July, the Fed held rates steady, and that decision passed by just a 9-3 vote, with three members already pushing for a hike at the time. The tide turned with a run of August data that landed within the same week.

• Key point: the Producer Price Index rose 5.4% year over year in August, accelerating from 4.8% in July, with roughly three-quarters of that jump coming from higher energy costs.
• Consumer inflation held at 3.4% annually, but the monthly gain accelerated to 0.4% from 0.1%, with gasoline responsible for about a third of the increase.
• Core inflation, which excludes food and energy, also picked up, to 0.3% monthly from 0.2% before.
• Oil climbed above $100 a barrel for the first time since July, tied to fallout from the conflict with Iran.

Goldman Sachs and Piper Sandler, which had previously expected the Fed to pause, switched their forecasts to a hike after those reports landed. Combined with a stronger-than-expected August jobs report, that shift tipped the committee toward decisive action.

How did the crypto market react?

In the minutes right after the announcement, Bitcoin traded in a tight range between $75,000 and $75,800, then climbed to around $76,000. The broader crypto market lost about 2.18% on the day.

Most major banks, including Barclays, Citigroup, JPMorgan, Morgan Stanley and UBS, now expect another 50 basis points of tightening by year-end. Bank of America, Deutsche Bank and RBC are positioned more aggressively, calling for 75 basis points.

For anyone planning to buy Bitcoin with hryvnia, the current level near $76,000 is still below where the month began, so the entry price remains favorable.

Why is this awkward for Fed Chair Kevin Warsh?

Wednesday's meeting was only Warsh's third since he was confirmed to the post in May. Last year, Donald Trump publicly said he wanted to install someone at the Fed who wanted to cut rates, and that is when he nominated Warsh. At the same time, the president urged his pick to act independently.

The outcome turned out to be contradictory. Warsh technically delivered on Trump's wish for independence, but he made a call that runs opposite to what the president originally expected from him. For markets, it was a reminder that inflation data outweighed political expectations this time around.

What happens next?

The Fed's upcoming meetings will show whether September's hike was a one-off or the start of a series. Bank forecasts range between 50 and 75 basis points of further tightening by year-end, and the final call will hinge on whether energy prices can be reined in.

For the crypto market, the main takeaway is simple. This rate hike did not trigger a crash. The price quickly stabilized near $76,000, and the coming weeks will show whether that level holds up against the next round of macroeconomic data.