The latest U.S. inflation numbers have put pressure on the Bitcoin price, while also reducing the chances of significant interest rate cuts. Although a small reduction is still anticipated, the deeper cuts once supported by Donald Trump now seem far less likely.
Key Highlights
- U.S. services inflation stayed higher than forecasts in August.
- The Federal Reserve is expected to stick with a smaller 25 basis point cut.
- Rising rate expectations pushed down the Bitcoin price and altcoins.
Inflation Data Impacts Bitcoin and Crypto Markets
On September 4, new economic figures revealed that services inflation remains elevated. The news sent Bitcoin down 2.4% to $109,444, while major altcoins suffered even larger losses, with the top 20 tokens slipping about 2.7%.
The drop followed the release of the ISM Services Prices Index, which posted a reading of 69.2 for August. While this was slightly below July’s 69.9 and under the forecast of 69.5, it still reflects strong price growth. Any figure above 50 indicates rising inflation, a trend that continues to concern investors and the Federal Reserve alike.
Implications for the Federal Reserve
The next policy meeting of the Federal Reserve is planned for September 17. With inflation remaining sticky, officials are expected to act cautiously. A 25 basis point rate cut is still likely, but larger reductions appear increasingly out of reach. Prediction markets currently assign an 86% probability that the Fed will proceed with the smaller cut.
Trump’s Push for Deeper Cuts Faces Resistance
Donald Trump has long argued for lower interest rates and, since July, has been pushing for a dramatic cut to just 1%. That would be a sharp drop from the current 4.25% to 4.50% range. However, given the latest inflation data, such a move is now highly improbable.
Even so, Trump retains other tools to influence borrowing costs. The Treasury Department, under his leadership, has continued to repurchase Treasuries — most recently $2 billion on September 3. Analysts have described this strategy as “quantitative easing without the Fed,” intended to reduce the government’s debt expenses.
Conclusion
Rising inflation continues to pressure the Bitcoin price while lowering expectations for aggressive interest rate cuts. The Federal Reserve is still expected to approve a modest 25 basis point reduction, but Trump’s calls for a major cut appear increasingly unrealistic. With inflation stubbornly high, both traditional markets and crypto investors will closely monitor the Fed’s September meeting for clearer direction.
