U.S. inflation rose to 3.0% year-on-year in September, with futures markets still pricing in next week’s Federal Reserve rate cut.
The overall CPI was 3.0% y/y and 0.3% m/m, while the core CPI was 3.0% y/y and 0.2% m/m. Gasoline prices rose 4.1% compared to the same month, and the inflation rate for evacuation centers remained around 3.6%. The Bureau of Labor Statistics released the Social Security Living Expenses on schedule despite the backdrop of the government shutdown.
Interest rate traders made little change in the wake of the report.
According to CME Group’s FedWatch, futures markets have a more than 90% chance of a 25 basis point increase in the FOMC on Oct. 29, raising the target to 3.50-3.75% from today’s 3.75-4.00%.
Beyond the immediate meeting, the same FedWatch distribution will have the center of the path closer to 3% by this time next year.
For the October 28, 2026 meeting, the highest probabilities range from 2.75% to 3.25%, with slight tails on either side.
The simple probability-weighted midpoint of this distribution is about 2.97%, which is consistent with a decline from current levels to about 3% over the next year.
| Target range (%, October 28, 2026) | probability |
|---|---|
| 2.50～2.75 | 17.6% |
| 2.75～3.00 | 29.8% |
| 3.00～3.25 | 28.4% |
| 3.25～3.50 | 14.3% |
| Other trash cans | 9.9% |
Road road maps and rules-based estimates provide useful cross-checks. Goldman Sachs expects three rate cuts in 2025 and two more in 2026, with fund rates in the range of 3.00% to 3.25% by late 2026.
The Cleveland Fed’s Simple Monetary Policy Rule Dashboard shows a median rule path in the low 3s for 2026, depending on set forecasts, a reminder that sticky elements of inflation could push policy rates above the path suggested by futures. If core disinflation stagnates, the gap between futures and rules creates hawkish risks for the 3% end-nation.
The context of the curve helps frame how much easing will impact financial conditions.
The two-year bond yield is hovering around 3.4% to 3.5%, and the 10-year bond yield is hovering around 4%, while the break-even inflation rate for 2030 is close to 2.25%.
Long-term interest rates are expected to remain steady around 4.1% to 4.2% over the next six to 12 months as term premiums and fiscal lines fall, according to a Reuters survey of strategists.
If the front end declines while the back end remains sticky, the curve will steepen and the extent to which policy cuts will “ease” broader financial conditions will be weakened.
For digital assets, the link to policy channels is now via both real yields and capital flows. According to CoinShares, weekly inflows into global crypto ETPs reached a record high of $5.95 billion in early October as Bitcoin hit a new high of nearly $126,000, but continued to see outflows, mainly from Bitcoin, during the following week amid heightened volatility, reaching nearly $946 million. Liquidations of more than $19 billion also occurred after US President Donald Trump announced additional tariffs on China and changed macro forecasts.
Spot Bitcoin is consolidating around $108,000 to $111,000 in the CPI and FOMC windows. These flow pulses are important to how macro impulses are transmitted to price, as demand for the ETF currently accounts for the majority of additional purchases.
In the near term, a 25 basis point rate cut combined with cautious guidance is likely to ease the front end while the 10-year note remains near 4%. If the dot plot and statement pave the way for a move in December, front-end easing could become more apparent and the dollar soften on the margin.
If the committee disagrees and front-end real interest rates rise instead, risk assets typically reverse until new data resets the trajectory.
The composition of the CPI ensures that the Fed remains on track for its first rate cut, as gasoline was the main driver for the month, and a retrace in pump prices in October or November would help the headline stories align with a story of gradual deinflation.
For October 2026, the distribution implied by futures and rules consists of three paths.
In the base case of mild disinflation, there is no labor shock, core inflation continues to trend downward, the policy interest rate remains at around 2.75% to 3.25%, and real yields decline as the front end declines.
A persistent inflation path will keep the core near or above 3%, a more cautious Fed, a stronger dollar and intermittent retightening of monetary conditions consistent with the Cleveland Rule bias, and funds rates will stabilize around 3.25% to 3.75%.
The growth concern path leads to front-loaded easing from 2.25% to 2.75% and dollar weakness after an initial risk-off phase.
In either case, the real yield remains central from Bitcoin’s beta, and the ETF flow channel adds convexity as conditions ease.
| The road to October 2026 | Policy interest rate range | macro marker | BTC read through |
|---|---|---|---|
| Glide and grind expansion | 2.75%～3.25% | The core gradually cools down to near 4.0% to 4.2% over 10 years. | It would be constructively bullish if real yields decline slightly and ETF inflows continue. |
| sticky inflation | 3.25%～3.75% | Core is close to 3%+, break-even point is solid | Staying within range due to strong USD and rising real interest rates |
| fear of growing up | 2.25%～2.75% | Unemployment rate rising, ISM below 50 | Two-stage recovery: risk-off and liquidity-driven |
Global crosswinds keep the situation in balance. The ECB has paused after cutting interest rates in early 2025, and major banks do not expect further rate cuts in 2025, limiting the euro-led fall in the dollar.
With UK inflation still above target, the Bank of England is easing more cautiously. In the US, the Chicago Fed National Financial Conditions Index and the 10-year TIPS yield remain useful indicators of Bitcoin’s macro beta, as tracked by FRED.
The short-term trigger is next week’s FOMC decision. According to futures, a 25 basis point rate cut is priced in with confidence, with market-implied closing prices clustered around 3% by October 2026.
(Tag translation) Bitcoin
