Summary
- The Federal Reserve has maintained steady interest rates during its last five meetings.
- In his address at a yearly gathering in Jackson Hole, Wyoming, Powell remarked on changing conditions.
- The Fed will reconvene in September.
The value of Bitcoin and other cryptocurrencies surged on Friday after Federal Reserve Chairman Jerome Powell left open the possibility of a rate cut during his speech in Jackson Hole, Wyoming.
Just 15 minutes into Powell’s address, Bitcoin rose past $114,700 from $112,000, marking a nearly 2.5% increase, while Ethereum jumped to $4,600 from $4,300, reflecting an almost 7% rise, according to data from CoinGecko. However, both cryptocurrencies still recorded losses of 2.9% and 1.4% respectively over the past week.
By the end of Powell’s comments, altcoins were experiencing significant gains. XRP and Solana both climbed over 6% in under an hour, with XRP returning to the $3 mark for the first time since Tuesday. Dogecoin witnessed an increase of over 7% in the same time frame. Nevertheless, many altcoins tracked by CoinGecko remained slightly negative for the week, indicating prior investor concerns about the Fed’s future actions.
A reduction in interest rates is expected to support cryptocurrency and other risk assets by enhancing investment liquidity. U.S. President Donald Trump has been pressuring Powell persistently to reduce rates amid fears of an economic slowdown.
Powell remained firm in his view that the central bank is grappling with heightened inflation risks compared to labor market conditions, yet he stated that the Fed is ready to modify its policy approach if faced with a conflict between its dual mandate of full employment and stable prices.
While emphasizing that the central bank isn’t on a fixed path, Powell remarked, “the baseline outlook and the shifting balance of risks may justify a policy adjustment,” suggesting that a rate cut could be possible at the upcoming September meeting.
However, Powell cautioned that the inflation resulting from Trump’s tariffs has not yet been fully captured in economic data, and it may take some time before this occurs.
“It will take additional time for tariff increases to permeate supply chains and distribution channels,” he noted. “Regardless of the circumstances, we will ensure that a transient price level rise does not evolve into a persistent inflation issue.”
Analysts indicated that Bitcoin and other cryptocurrencies experienced declines earlier in the week in expectation of Powell’s eighth and final speech as Fed chair at Jackson Hole. With the markets preparing for easing in September, they noted that “cautiously hawkish” commentary could lead to disappointment among investors.
Bitwise Senior Investment Strategist Juan Leon shared with Decrypt on Thursday his expectation that Powell would emphasize persistent inflation and tariff uncertainties, while steering clear of committing to a rate cut in September, which may apply pressure on risk assets with a more assertive tone.
In defense of his time as Fed chair, Powell reflected on the COVID-19 pandemic, highlighting the drastic measures taken to stabilize markets and stimulate growth as the U.S. economy came to a standstill almost instantly. Following an economic rebound from pandemic-induced constraints, inflation peaked at a four-decade high of 9.1% in June 2022.
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