Soft economic data has Goldman Sachs doubting a September rate increase, offering good news for bitcoin bulls.
Under our baseline economic forecasts, the inflation news is more likely to improve further than to deteriorate anew as the year progresses," Hatzius wrote in a note Sunday. "We still think market pricing for the funds rate is too hawkish."
Interest rates dictate the availability of credit and fiat liquidity in the broader economy, directly influencing demand for risk-on assets such as bitcoin. Rate increases are traditionally bearish, a dynamic clearly visible during the aggressive Fed tightening that triggered the 2022 slide. Conversely, rate cuts are viewed as bullish, echoing the crypto rally that followed the March 2020 Covid crash.
At the time of writing, traders are pricing in just a 30.6% chance that the Fed will raise its benchmark interest rate by 25 basis points to the 3.75%–4% range, with the majority expecting the status quo to continue, according to CME FedWatch data. The odds dropped after last week's July report showed inflation slowing, as expected.