Hot PPI Flips the Fed Trade, Crypto Slides Into FOMC
August producer prices topped forecasts, lifting September rate-hike odds toward 66%. Bitcoin, Ethereum and XRP fall ahead of the Fed decision.
Inflation Bites Again
US producer prices rose 0.4% in August, driven by a 1.1% jump in goods prices that pushed the annual rate past 5.3%, up from 4.7% in July and comfortably above consensus. Energy did the damage: the Middle East conflict lifted crude, and the energy component alone climbed 4.2% on the month.
It is the second hard print in a week, and it flips the tape. A soft jobs report had traders leaning toward a pause, even a cut. The producer numbers argue the other way: cost pressure is sitting in the pipeline and will feed through to the consumer print.
The Fed Trade Turns
CME FedWatch now puts the odds of a hike at the September 16 meeting near 66%, well up from where they sat before the release. Governor Christopher Waller had flagged both August prints as decisive, and Chair Warsh has set a hawkish tone since Jackson Hole. Tomorrow's CPI report becomes the last big variable into the FOMC.
The dollar firmed on the number, the DXY turned green, and real yields pushed higher. Both weigh directly on assets that pay no coupon. Rates traders got the message: the front end already carries the premium and the curve keeps flattening.
The Read for Crypto
Bitcoin is slipping and holding only just above $80,000, with Ethereum and XRP following and Dogecoin down more than most. The pattern is familiar: rising rate expectations pull liquidity from the far end of the risk curve first, and that is where the altcoins live.
ETF flows back up the caution: after a strong August, spot Bitcoin products flipped to outflows at the start of September, and institutional money is sitting on its hands. That removes the demand cushion that softened earlier dips.
The setup shifts for traders. While the market prices a hike, rallies stay sellable and implied vol should build into the meeting. A cooler CPI is the only near-term relief valve; confirm the PPI and the $78,000 zone comes into view on Bitcoin. Into the FOMC, one number now sets the tape, and inflation is pointing up.