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Highlights
- Jerome Powell highlighted the growing risk in the labor market, which may warrant a rate cut.
- He admitted that effects of tariffs on inflation may not happen as they earlier expected.
- The BTC price broke above $116,000 on the back of the news.
In a massive development for the crypto market, Fed Chair Jerome Powell suggested that they may have to make a rate cut at the September FOMC meeting during his Jackson Hole speech. This has led to a massive spike in the BTC price, with other crypto assets rising on the back of the news.
Jerome Powell Suggests A Fed Rate Cut At September FOMC Meeting
While giving his opening remarks at the Jackson Hole Conference, the Fed Chair stated that the shifting balance of risks may warrant an adjustment of monetary policy. This indicates his openness towards a rate cut at the September FOMC meeting.
The Fed Chair further alluded to the labor market and how the downside risks to employment are on the rise. He further remarked that labor supply has softened in line with demand. Jerome Powell noted that this development has sharply lowered the “breakeven” rate of job creation needed to hold the unemployment rate constant.
Basically, the Fed Chair suggested that the recent job data indicate that the labor market weakening is worse than they envisaged. The July data showed that nonfarm payrolls rose to 73,000, lower than expectations of 147,000. Meanwhile, the May and June data were revised downwards from 144,000 and 147,000, respectively, to 19,000 and 14,000.
Jerome Powell suggested that they can no longer ignore the downside risks to employment. This is contrary to what the FOMC minutes showed, with the Committee indicating that upside risks to inflation were their priority over the downside risks to employment.
The Fed Chair also mentioned that the Trump tariffs are beginning to push prices higher and that they expect the effects of these tariffs to accumulate over the coming months, with high uncertainty about timing and amounts. However, he raised the possibility that the tariffs’ effects might not last, rather than being an ongoing inflation problem.
BTC Price Rallies Following The Fed Chair’s Speech
Jerome Powell’s Jackson Hole speech has provided a massive boost for the crypto market, with the Bitcoin price rising on the back of the Fed Chair’s comments. TradingView data shows that the flagship crypto is currently trading above $116,000, up from an intraday low of around $112,000.
As CoinGape had reported earlier, the crypto market had crashed as investors were pricing in a hawkish stance from the Fed Chair due to the rising inflation. This bearish sentiment had begun last week following the U.S. PPI data release, which showed that inflation rose to 3.3%, year-on-year (YoY), last month.
However, Jerome Powell’s signal of a Fed rate cut has now provided renewed bullish momentum for Bitcoin and other crypto assets. A cut boosts risk-on sentiment and could inject more liquidity into these risk assets.
CME FedWatch data shows that the odds of a 25 basis points (bps) September rate cut have jumped to 89.2%. As CoinGape reported, these odds had dropped from as high as 99% last week to as low as 71% as of yesterday.
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