Markets whipsaw following Jerome Powell's hawkish speech at Jackson Hole

Quick Take

  • Crypto markets dipped during Powell’s speech on Friday before recovering. 
  • Jerome Powell’s speech in Wyoming implied tough times ahead.

Crypto prices rose in the hour leading up to the speech, bitcoin was trading a little higher than $21,800 and ether rose above $1,700. Prices dipped during the speech as the Fed chair shared his colleagues median interest rate projections – just under 4% through the end of the year.

"While the lower inflation readings for July are welcome, a single month's improvement falls far short of what the Committee will need to see before we are confident that inflation is moving down," Powell said. He then went on to add that the Fed's decision in September will depend on the "totality of the incoming data and the evolving outlook."

The annual inflation rate in the US slowed to 8.5% in July from a more than 40-year high of 9.1% in June. That was below market forecasts of 8.7%. The US economy dropped by 0.6% during the second quarter, data yesterday showed. That was better than estimates of -0.7%.

An aggressive stance against inflation has and likely will continue to be a headwind in the short-term for all risk assets, including digital assets, Fidelity Digital Assets research analyst Jack Neureuter said.

Powell warned households and businesses will feel the pain as the bank acts to rein in inflation.

"If there is growing evidence that inflation has peaked, then it’s likely that longer-dated interest rates would fall substantially from their current levels – serving as a possible catalyst for both risk assets and relatively looser financial conditions," Neureuter said.

Esther George, head of the Kansas City Fed, shared more revealing remarks on Thursday, telling Bloomberg TV rates may go above 4% at some stage. “We have to get interest rates higher to slow down demand and bring inflation back to our target," George said. 

The Jackson Hole symposium takes place every year in Wyoming and is typically attended by central bankers, finance ministers, academics and other market participants from around the globe. The conference theme for 2022 is "reassessing constraints on the economy and policy."

 


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About Author

Adam Morgan is The Block's markets reporter. He has been based in London for the past year, initially freelancing and working for a start-up there before beginning a fellowship at Business Insider. He Tweets @AdamMcMarkets