The United States central bank has begun to split over inflation figures that have yet to be tamed. In its meeting on July 28-29, the Federal Reserve decided to hold interest rates at 3.50%-3.75% with a 9-3 vote. Three committee members dissented, urging a 25-basis-point hike. Chicago Fed President Austan Goolsbee even called this inflation rate above the 2% target the biggest US economic problem today.
Market focus now rests on the release of July’s Consumer Price Index (CPI) data by the Bureau of Labor Statistics at 8:30 AM ET on August 12. The consensus among economists anticipates annual inflation to tick down slightly from 3.5% to 3.4%, while core inflation is predicted to ease from 2.6% to 2.5%. These figures will serve as the first test of where the Fed’s new direction leans.
The Hormuz Factor and Pressure from the Hawkish Camp
Debates among policymakers could become increasingly complex due to external sentiment. The direction of monetary policy is now also overshadowed by the closure of the Strait of Hormuz resulting from conflict between the US and Iran. In normal times, about a fifth of all global oil and gas supply passes through this waterway. Disruptions to energy logistics supplies could trigger a price spike at any time and reignite the flames of inflation.
These conditions outside America add weight to the arguments of the hawkish, pro-tightening camp. Minneapolis Fed President Neel Kashkari, Beth Hammack, and Lorie Logan support the option of an immediate interest rate hike to curb the spread of rising prices to various economic sectors.
Bitcoin Holds Its Breath on Low Volume
This policy tug-of-war has directly weighed on interest in the crypto market. Bitcoin continues to be held in a sideways trend for five consecutive weeks around the $64,000 range. Data shows that crypto trading volume is currently slumped to its lowest point in the last three years. Bitcoin’s implied volatility has also been dragged down as most market participants are reluctant to enter before there is monetary policy certainty and clarity on the status of the Digital Asset Market Clarity Act bill.
Inflows into spot Bitcoin ETF instruments have actually remained stable. However, this capital influx has been offset by heavy selling pressure via OTC mechanisms from miners and large accumulators like MicroStrategy (MSTR). This situation forced Bitcoin’s value to only rise 2% last week, even as institutional buying trends persisted.
Facing September’s Red Report Card
The road ahead holds additional challenges. Historical reports from the CoinGlass platform confirm that September is the weakest month for Bitcoin price movement, marked by an average drop of about 4% since 2013.
Analysis from market prediction platforms places a 59% probability that the Fed will not raise interest rates in September. Additionally, there is another 59% chance regarding the potential for at least one new interest rate hike before the turn of the year 2026. Today’s CPI publication is a fresh piece of directional data capable of breaking the market freeze of the past month.
Reported from crypto.news.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
