Analysis: UBS expects two Fed hikes that could pressure Bitcoin through December

UBS expects the Federal Reserve to raise rates by 25 basis points in both September and December. UBS had previously expected no policy change this year. UBS cited strong August labor data. UBS also cited hawkish Federal Reserve communication. UBS cited inflation risks from supply bottlenecks. Futures price in a roughly 58% chance of a quarter-point hike at the Sept. 15-16 meeting. That probability was 52% before the jobs report. The Bureau of Labor Statistics reported that employers added 162,000 jobs in August. The unemployment rate held at 4.1%. Hiring exceeded the average monthly gain of 31,000 over the preceding 12 months. Food services and drinking places added 59,000 jobs. Local government education added 42,000 jobs. Information employment fell by 23,000. Governor Christopher Waller said on Sept. 3 that continued inflation progress could justify holding rates steady. Waller said hot August inflation could make him consider a hike. Bitcoin pays no contractual interest. Higher expected US rates can keep Treasury yields elevated. Those conditions can make dollar-denominated interest-bearing assets more attractive. Higher borrowing costs can make leveraged positions harder to maintain. Tighter financial conditions can reduce fresh capital flowing into risk assets. A 2023 IMF working paper found that Federal Reserve tightening reduced a common crypto price factor through weaker risk-taking. The size of any response in 2026 remains uncertain. Bitcoin traded around $79,375 according to CryptoSlate data around 14:02 UTC on Sept. 7. The next scheduled test is August CPI on Sept. 11. The FOMC meeting is scheduled for Sept. 15-16. The Federal Reserve communications blackout began Sept. 5 and runs through Sept. 17. The December meeting is scheduled for Dec. 8-9. UBS expects another hike then. The inflation and employment picture could change substantially before that decision. Cooler inflation could ease pressure on Bitcoin. Persistent inflation would give UBS's two-hike outlook more weight.