Gasoline spikes, inflation jumps to 3.7% and bitcoin slips below $83,000 as an October rate hike goes back on the table

Inflation came in hotter than Wall Street expected on Wednesday morning, and the crypto market gave back much of its overnight gain within an hour. The consumer price index rose 0.6% in September and 3.7% over the past twelve months, the Bureau of Labor Statistics said, compared with 3.4% in August. Energy did most of the damage: the energy index rose 5.2% in the month, with gasoline up 9.1%, and energy prices are up 20.4% over the year. Shelter rose 0.4% and food was flat. Stripping out food and energy, core prices rose 0.3% on the month and 2.6% on the year, both a tenth above the forecasts Yahoo Finance cited.

Bitcoin had opened the US day at about $83,093, up 1.6% from Tuesday's open, and was at about $82,419 by 9:15am ET, Yahoo Finance reported. Ether opened at about $2,496 and slipped to about $2,462. The Crypto Times, citing CoinGecko, put the 24-hour low near $82,919.

The reason is the Federal Reserve. It raised rates by a quarter point in September, its first increase in more than three years, and the market had largely faded the chance of a second move at the October 27-28 meeting. Yahoo Finance said CME FedWatch showed the odds of a hike at roughly 50-50 after the report, against a near 80% chance of no change earlier in the week. Sygnum's Can-Luca Köymen said in a note quoted by The Crypto Times that core at 0.3% "puts an October hike back in play". Higher rates raise the cost of leverage and make Treasury yields a stiffer rival for assets that pay nothing.

The timing stings because flows had just turned. US spot bitcoin ETFs took in $175.7 million on Tuesday, October 13, per Farside Investors: $103.1 million into Fidelity's FBTC, $65.9 million into BlackRock's IBIT and $6.7 million into Morgan Stanley's MSBT, reversing Monday's $65.4 million outflow. Ether ETFs added $24.8 million, split between Grayscale's Ether Mini Trust and Fidelity's FETH, their first positive day after ten consecutive sessions of redemptions going back to September 29. Whether that money stays put now depends on the Fed's next two weeks of signalling.