Bitcoin Rebounds Above $78K as Fed Hike Odds Surge on Hot Core Inflation

Bitcoin rebounded above $78,000 on Friday after U.S. inflation data met headline forecasts but showed a hotter-than-expected monthly core increase, sharply raising market odds for a Federal Reserve rate hike next week. The cryptocurrency's recovery followed a volatile session that saw it dip below $77,000 before climbing back. The U.S. Bureau of Labor Statistics reported that the Consumer Price Index rose 3.4% year-over-year in August, matching forecasts. However, the monthly core CPI, which excludes food and energy, increased 0.3%, exceeding the 0.2% forecast. Energy costs, particularly gasoline, were a major contributor, with gasoline prices rising 3.9% monthly. The data immediately shifted expectations for the Federal Reserve's September 15-16 meeting. Prediction markets like Polymarket showed the probability of a 25-basis-point rate hike jumped to around 81-86%, up from approximately 60-70% the previous week. A hike would lift the federal funds target range to 3.75% to 4.00%. Bitcoin initially dropped to around $76,000 after the report but staged a rapid turnaround, trading near $78,700 by the afternoon, up more than 2% on the day.