Markets have sharply increased the odds that the U.S. Federal Reserve will raise interest rates in September, with pricing for a quarter-point increase climbing from below 53% to as high as 82% in roughly a week before easing to 73%, according to CME FedWatch. The rapid repricing has placed Bitcoin, high-growth technology shares and large corporate spending plans under renewed pressure from a potentially tighter liquidity environment.
The Federal Open Market Committee held its target range for the federal funds rate at 3.50% to 3.75% on July 29, extending its pause to a fifth consecutive meeting. The 9–3 vote also revealed a more hawkish split within the committee: Beth Hammack, Neel Kashkari and Lorie Logan dissented in favor of an immediate 25-basis-point increase, pointing to inflation that has remained above the Fed’s 2% target for more than five years.
A September hike would raise returns on cash and short-dated government debt while increasing borrowing costs across the economy. For Bitcoin and other non-yielding assets, higher rates can increase the appeal of money-market funds and Treasury bills, particularly when macroeconomic uncertainty is rising.
Oil prices have reshaped the inflation debate
The shift in rate expectations has coincided with higher energy costs following tensions near the Strait of Hormuz, a narrow shipping corridor that carries roughly one-fifth of global daily seaborne liquid oil flows. WTI crude futures gained about 20% during July, according to market data referenced in the materials.
Oil has an immediate role in the consumer inflation readings watched by the Fed, though the impact can vary across gasoline, transport and other energy-linked costs. The June Consumer Price Index, released July 14, showed annual inflation at 3.5%. That report was helped by a 5.7% month-over-month decline in energy prices during a ceasefire period.
The next CPI release, scheduled for Aug. 12, will offer the first major test of whether that cooling trend can hold after July’s oil rally. A stronger-than-expected reading could reinforce the case made by the three dissenting policymakers, while another soft report could temper the market’s expectation of a near-term increase.
The Fed’s own June projections already showed meaningful division. Nine of 18 officials anticipated at least one rate increase during 2026, while the median projection for core Personal Consumption Expenditures inflation — the Fed’s preferred underlying inflation measure — was raised to 3.3% for the year.
Economists surveyed by FactSet have taken a less aggressive view of the longer-term policy path. Most respondents expected rate cuts to resume in 2027, totaling about 50 basis points. The gap between that outlook and September futures pricing suggests traders see a risk of a short-term inflation shock rather than a settled expectation of a sustained new tightening cycle.
Bitcoin holds a narrow range as yields rise
Bitcoin has traded largely between $64,000 and $65,000 as expectations for higher rates increased. The range reflects a market that has so far absorbed the macro shift without a decisive break, although Bitcoin previously fell below $64,000 during earlier macro-driven selloffs this year.
Gold and silver, meanwhile, have recorded double-digit gains over the same period. Their stronger performance does not establish a fixed relationship with Bitcoin, but it shows that demand for alternative assets has not moved uniformly as energy costs and rate expectations rose.
Bitcoin’s record during Fed tightening has also been uneven. In 2023, the cryptocurrency gained 21% despite two additional rate increases by the central bank. That period included crypto-specific developments and changing expectations around future policy, illustrating why a rate decision alone does not dictate Bitcoin’s direction.
The more immediate concern is liquidity. Higher policy rates feed into financing costs, discount rates and the returns available on lower-volatility instruments. Money-market fund assets reached a record $7.85 trillion by late July, according to the Investment Company Institute, showing the scale of cash parked in yield-bearing vehicles while rates remain elevated.
Technology spending faces tougher discount-rate math
The rate debate is also colliding with an expensive expansion in artificial intelligence infrastructure among the largest U.S. technology companies. Their second-quarter updates featured rising cloud revenue and expanding capital-expenditure plans, but equity markets reacted differently depending on revenue outlooks, spending levels and expected cash generation.
Alphabet said Google Cloud revenue rose 82% year over year and guided for full-year capital expenditures of $195 billion to $205 billion. Its shares fell 7% following the update. Meta reported 28% year-over-year revenue growth and lifted planned capital expenditure to between $130 billion and $145 billion, after which its shares dropped nearly 9%.
Apple’s shares declined after fourth-quarter revenue guidance missed market expectations and the company flagged supply-chain constraints. Microsoft offered the clearest counterexample: it said annual cloud revenue exceeded $100 billion, reduced its fiscal 2027 capital-expenditure guidance from $190 billion to $175 billion, and saw its stock rise more than 15% in one session, its largest one-day gain in nearly 18 years.
The capital expenditure figures cited across Alphabet, Meta, Apple and Microsoft approached $750 billion. Such spending is typically funded from operating cash flow as well as debt capacity, making changes in borrowing costs and discount rates relevant to how markets assess the eventual returns from AI infrastructure.
Higher risk-free rates generally reduce the present value assigned to profits expected years ahead, a calculation that can weigh more heavily on growth companies with large current spending commitments. Because major technology groups carry substantial weight in the S&P 500 and Nasdaq, their moves can also amplify broader reactions to inflation data and Fed expectations.
The Aug. 12 CPI release now stands as the next major catalyst for both rate markets and risk assets. A renewed acceleration in energy-linked inflation would likely keep September hike pricing elevated, while evidence that the June cooling persisted could ease pressure on Bitcoin and rate-sensitive technology valuations.
To see how changing Fed policy can move crypto markets, explore our insights in this detailed analysis.
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our Terms of Service and Risk Disclosure.
