Cryptocurrency markets have experienced heavy selling pressure following hotter-than-anticipated US inflation data that has prompted reassessment of Federal Reserve policy. Bitcoin traded below $82,000 support levels, while altcoins recorded notable losses. Liquidations across crypto markets exceeded $900 million in a 24-hour period.
UBS has revised its Federal Reserve rate hike outlook in light of the inflation figures. The bank now anticipates two additional rate increases, potentially occurring in December 2026 and March 2027, compared to its previous expectation of a single hike in December 2026.
Inflation Data Exceeds Forecasts
September's producer price index showed headline inflation rose 1.3% month-over-month, surpassing the 0.6% forecast, while annual producer inflation reached 6.3% against expectations of 5.4%. Core PPI inflation also delivered upside surprises, with monthly prices rising 0.7% versus the 0.3% estimate and annual core readings reaching 5.0% compared to the anticipated 4.4%.
These figures came following US CPI data that also exceeded market forecasts and climbed to 3.7%. According to the CME FedWatch Tool, the odds of a December Fed rate hike are now above 66%.
Market Implications
Market pricing suggests investors anticipate nearly five rate hikes, exceeding UBS's forecast and highlighting growing uncertainty over the Federal Reserve's policy path. Higher borrowing costs can reduce liquidity and weaken demand for riskier assets such as cryptocurrencies.
The Federal Reserve's FOMC meeting scheduled for October 28 is expected to provide clarity on the central bank's next policy moves. Hawkish comments regarding rate hike plans could trigger further volatility across financial markets and the cryptocurrency sector.
