US inflation rose to 3.0% year-on-year in September, and futures markets are still pricing in a Federal Reserve rate cut next week.
The headline CPI registered 3.0% year-on-year and 0.3% month-on-month, while the core CPI remained at 3.0% year-on-year and 0.2% month-on-month. Gasoline increased 4.1% monthly and housing inflation remained close to 3.6%. The Bureau of Labor Statistics posted on time to meet Social Security cost-of-living schedules despite the shutdown backdrop.
Rates traders hardly changed course after the report.
CME Group’s FedWatch shows futures put the probability of a 25 basis point move at the Oct. 29 FOMC meeting above 90%, taking the target from the current 3.75% to 4.00% toward 3.50% to 3.75%.
Beyond the immediate meeting, the same FedWatch distribution places the center of the trajectory near 3% by this time next year.
For the October 28, 2026 meeting, the highest odds sit in the 2.75% to 3.25% range, with modest tails on either side.
A simple probability-weighted midpoint of that 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 containers | 9.9% |
Street maps and rule-based estimates offer useful cross-checking. Goldman Sachs expects three cuts in 2025 and two more in 2026, which will put the funds rate in a range of 3.00% to 3.25% by the end of 2026.
The Federal Reserve Bank of Cleveland’s Simple Monetary Policy Rules dashboard shows a median rules path at level 3 for 2026 depending on the stated forecast, a reminder that sticky components of inflation can keep interest rates above the path implied by futures. The gap between futures and rules creates a 3% hawkish end-state risk if core disinflation stalls.
The context of the curve helps frame how much easing will trickle into financial conditions.
Two-year yields have remained near the midrange of 3.4% to 3.5% and 10-year bonds near 4%, while 30-year breakeven inflation is near 2.25%.
A survey of strategists compiled by Reuters points to a long-term finish remaining firm around 4.1% to 4.2% over the next 6 to 12 months as the term premium and fiscal bid limit decline.
If the trailing leg remains tight while the trailing leg falls, the curve would steepen, moderating how “easy” overall financial conditions can become even with policy cuts.
In the case of digital assets, the link with the political path now passes through both real returns and fund flows. According to CoinShares, global crypto ETPs recorded a record weekly inflow of $5.95 billion in early October, when Bitcoin set a new high near $126,000, followed by outflows the following week, led by Bitcoin, near $946 million amid increased volatility. We also saw liquidations of more than $19 billion after US President Donald Trump upset macro projections by announcing new tariffs on China.
Spot Bitcoin has been consolidating between $108,000 and $111,000 in the CPI and FOMC window. These flow impulses are important for how macroeconomic impulses are transmitted to price, as ETF demand now accounts for a large portion of incremental purchases.
In the short term, a 25 basis point cut coupled with cautious guidance would likely ease the front, while the 10-year remains near 4%. If the dot plot and statement open a path for a move in December as well, the initial easing would be clearer and the dollar could weaken at the margin.
If the Committee backs down and initial real rates rise instead, risk assets typically retreat until new data resets the path.
The CPI combination gives the Fed cover to stay on track for a first cut, as gasoline was the main monthly driver, and a pullback in pump prices in October or November would help the headline numbers align with a story of gradual disinflation.
Looking ahead to October 2026, three paths frame the distribution implied by futures and rules.
A base scenario of slow disinflation maintains a downward trend in core inflation without a labor shock, the official interest rate hovers around 2.75% to 3.25%, and real yields decline as the front end falls.
A sticky inflation path keeps core inflation near or above 3%, the Fed becomes more cautious and the funds rate stabilizes closer to 3.25% to 3.75% with a firmer dollar and an intermittent readjustment of financial conditions, consistent with the Cleveland rules bias.
A growth fear trajectory leads to early easing towards 2.25% to 2.75% and a weaker dollar after an initial phase of risk aversion.
In all cases, Bitcoin’s beta relative to actual returns remains critical, and the ETF flow channel adds convexity when conditions improve.
| Road until October 2026 | Policy Rate Range | Macro bookmarks | BTC reading |
|---|---|---|---|
| Slip and grind deflation | 2.75%–3.25% | The core cools gradually, at 10 years about 4.0%-4.2% | Constructively bullish if real yields decline and ETF inflows persist |
| Sticky inflation | 3.25%–3.75% | Core close to 3%+, firm balance points | Range-bound, with USD firm and real rates higher |
| growth scare | 2.25%–2.75% | Unemployment increases, the ISM is below 50 | Recovery in two steps, risk-free and then liquidity-driven |
Global crosswinds keep the outlook balanced. The ECB has paused after its early 2025 cuts and the big banks are not expecting more in 2025, limiting a euro-driven decline in the dollar.
The Bank of England is easing policy more cautiously as UK inflation remains above target. In the United States, 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 catalyst is next week’s FOMC decision. Futures show a 25 basis point cut is priced in with conviction, with the market implied endpoint centered around 3% by October 2026.
