Jerome Powell Speaks at Jackson Hole! Highlights and Initial Reactions of Bitcoin

Jerome Powell has begun his much-anticipated speech at Jackson Hole, Wyoming. Powell signaled a less-than-optimistic outlook on cutting down the whales interest rates, while emphasizing the high level of uncertainty that makes the job of monetary policy makers difficult. Powell Signals There Will Be Cutting Down the Whales in Interest Rates The highlights of Powell's speech at the Jackson Hole symposium are as follows: When I took the podium to speak a year ago, the economy was at a turning point. Our policy interest rate has fluctuated between 5.5% and 5.5% for over a year. This restrictive policy stance is appropriate to help reduce inflation and maintain a sustainable balance between aggregate demand and aggregate supply. The price increase risks for inflation have eased. But this year, the economy is facing new challenges. Significant tariff increases among our trading partners are reshaping the global trade system. While the labor market generally seems to be balanced, this state of balance is quite strange, arising from a significant fall in both labor supply and demand. This unusual situation indicates an increasing risk to the labor market. Regarding inflation, the latest data shows that the 12-month PCE inflation rose by 2.6% in July. Core inflation increased by 2.9%. The labor supply has weakened according to demand. The risk balance is shifting. Currently, the policy is in a restricted area, and the changing fundamental outlook and risk balance may require us to adjust our monetary policy stance. "Tariffs pose a risk of inflation re-emerging, and an economic recession remains a scenario that the Fed needs to avoid. However, the baseline scenario is that we believe the impact of tariffs on inflation will only be short-lived." Powell's speech seemed cautious and moderate, hinting at the possibility of cutting down the whales but not committing to a definitive rate cut. Kobeissi Letter assesses that the Fed will cut interest rates by 25 basis points in September and "blames" the labor market for this. Powell's Remarks on Trump Although Powell did not specifically mention the White House's request for cutting down the whales, he emphasized the importance of the Fed's independence. "FOMC members will make this decision entirely based on data and its impact on economic outlook as well as risk balance. We will never change this approach," Mr. Powell said. Bitcoin is Increasing in Price Before Powell's speech, the price of Bitcoin fell below $112,000, hitting the lowest level in 1.5 months. Below is the price movement of Bitcoin during Powell's speech:

The speech of the Fed Chairman at the annual conference of central banks coincides with the increasing uncertainty surrounding the economy and interest rate policies. Expectations for a fall in interest rates in September are rising again, with a 25 basis point cut priced in at 89.4%. The likelihood of maintaining the interest rate is priced at 10.6%.