Bitcoin Holds Firm as U.S. Housing Weakens Before Wednesday’s Fed Meeting

Weaker U.S. housing activity and firm inflation readings gave markets opposing signals on rates before the Federal Reserve’s Wednesday, Oct. 28, decision, with estimates putting the chance of an immediate increase below 20%.

Bitcoin (BTC) held up comparatively well through the week’s cross-asset volatility, even as equity swings affected risk assets at times. Its sensitivity to interest-rate expectations keeps the Fed outlook relevant for crypto markets.

Two market estimates dated Oct. 20 put the chance of a 25-basis-point increase at Wednesday’s meeting at about 12% and nearly 17%. The higher estimate had been above 40% a week earlier. For December, markets assigned about an 83% probability to another increase. A 25-basis-point move equals one-quarter of a percentage point; these probabilities reflect expectations rather than a Fed decision.

Housing indicators showed a clear slowdown. Homebuilder confidence fell three points to 29, its lowest reading since June 2012. Housing starts declined 5.2% in September to an annualized pace of 1.221 million. Pending home sales fell 7.3% from August to 66.0, a record low since the index began in 2001. The declines are consistent with borrowing costs weighing on housing activity.

Inflation moved in the other direction. The Consumer Price Index rose 0.6% in September from the prior month and 3.7% from a year earlier. The Producer Price Index increased 1.3% month over month and 6.3% year over year. Those readings keep inflation in focus even as weaker housing activity gives policymakers a reason to move cautiously.

The two sets of data pull the rate outlook in different directions. The Fed could hold rates on Oct. 28 while still signaling concern about price growth. An unexpected October increase would likely be more disruptive for markets than a well-signaled December move, because it would tighten financial conditions more abruptly than current expectations imply. The distinction matters for Bitcoin, which remains sensitive to changes in rate expectations.

The macro backdrop follows Bitcoin’s October pullback. The Fed’s Wednesday decision is the next scheduled policy event for markets.