Bitcoin falls below $77,000 after Waller flags rate hikes

Bitcoin fell below $77,000 on Friday after Federal Reserve Governor Christopher Waller signaled he could not rule out future rate hikes. The comments pushed traders to place roughly a 40% probability on a 25-basis-point increase at the Oct. 28 meeting.

Waller spoke in Frankfurt at an event titled “Policy Risks Have Changed,” backing a near-term pause in rate moves while warning that persistent inflation might force a different path. Waller warned, “I can no longer rule out rate hikes further down the road if inflation does not abate soon, and that is especially true if measures of inflation expectations, some of which have risen lately, show signs of becoming unanchored.”

Futures markets reacted quickly. The CME FedWatch Tool showed about a 40% chance of a 25-basis-point hike on Oct. 28 and near a 49% chance of a hold. The forward curve steepened to reflect higher odds of tightening later in the year.

Bitcoin has fallen about 4.5% over the past week as real Treasury yields have risen and the U.S. dollar has strengthened, conditions that reduce demand for assets that do not pay interest. Prices slipped below $77,000 as traders adjusted positions to the revised outlook for U.S. monetary policy.

Recent economic data added pressure on markets. Headline consumer prices rose 0.6% in April, and core personal consumption expenditures, the Fed’s preferred inflation measure, is around 3.3% year over year. The University of Michigan’s May consumer sentiment index fell to 44.2, the lowest reading since the series began in 1952, while one-year inflation expectations rose to 4.8%.

Energy and geopolitical developments have affected inflation forecasts. Higher oil prices and conflict in the Middle East have been identified as factors that could keep inflation elevated and influence the Fed’s policy path. If energy prices retreat or tensions ease, the odds of further tightening could ease as well.

Traders and analysts said they will watch incoming inflation reports, central bank statements and energy market moves for signs the Fed’s outlook is changing.