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Highlights
- The Fed Chair said that the figures right now is just the very beginning of the tariff inflation.
- Jerome Powell's speech suggested that the Fed isn't ready to cut interest rates just yet.
- Bitcoin dropped below $116,000 on this development.
Fed Chair Jerome Powell has sparked a bearish sentiment among market participants following his FOMC speech. Powell indicated that inflation is likely to rise higher in the coming months thanks to the Trump tariffs. Meanwhile, the Bitcoin price has crashed on the back of this hawkish statement from the Fed Chair.
Jerome Powell Says This Is The Beginning Of Tariff Inflation
During his FOMC speech, the Fed Chair stated that what the market is seeing now is the very beginning of tariff inflation. Based on this, the Fed expects inflation to trend higher in the coming months, especially if the reciprocal tariffs take effect following the August 1 deadline.
Jerome Powell’s speech followed the FOMC meeting in which the Fed decided to hold rates steady amid concerns of rising inflation. The Fed Chair said that there are so many uncertainties left to resolve and that it feels like there is much to come.
He also mentioned that they have yet to make any decision about a September rate cut, as they don’t do that in advance. However, his speech suggests that the Fed is leaning towards holding rates at that meeting.
Jerome Powell further commented on the Trump tariffs, stating that they have to think of it as still being in the quite early days of assessing the impact of the tariffs. However, he noted that the tariffs are starting to show in some consumer prices. He added that they will have to watch and learn empirically about the process.
The Fed Chair also remarked that it will be difficult to determine if the data will be clear by the September meeting. He claimed that their focus is to get the timing right, in relation to monetary easing.
Jerome Powell’s speech sounded more hawkish than dovish this time around, sparking a bearish sentiment among market investors. TradingView data shows that the BTC price crashed below $16,000 amid the speech from as high as $117,500. However, Bitcoin is now rebounding and looking to reclaim the $117,000 level again.
Traders Reducing Their Bets On A Rate Cut
Market participants are now reducing their bets on a Fed rate cut this year following Jerome Powell’s speech. CME FedWatch data shows that the odds of a 25-basis-point (bps) September rate cut dropped from 63.7% to 47.1% following the Fed Chair’s speech.
Furthermore, there is a 38.3% chance that the Fed will cut rates in October. However, that might be the only rate cut as there is a 38.3% chance that the interest rate will remain the same at the December meeting.
All eyes will now turn to the Personal Consumption Expenditures (PCE) inflation data, which will drop tomorrow. Notably, this is the Fed’s favorite inflation gauge and could provide them with further clarity on their next step. Experts expect the monthly PCE and core PCE to come in at 0.3%. A figure lower than this will be bullish for the market.
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