Bitcoin falls after Fed's Powell takes hawkish tone at Jackson Hole

Quick Take

  • Bitcoin’s price fell and stock indices turned red shortly after Jerome Powell said that “inflation still remains too high.”

Bitcoin's price fell below $26,000 after Federal Reserve chair Jerome Powell took a hawkish tone during a speech in Jackson Hole, Wyoming on Friday.

"Two percent is and will remain our inflation target," he said. "We are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to that level over time," he said.

The Fed chair suggested the central bank might be prepared to raise rates further.

"We intend to hold policy at a restrictive level until we are confident inflation is moving steadily down toward are objective," he added.

Bitcoin dropped to $25,942 after the speech, down 1% over the past 24 hours, according to CoinGecko. The digital asset descended into the red, along with major stock indices, after the speech suggested the door remained open for further tightening from the central bank.

Recent market rally grinds to a halt

Recent market gains after Wednesday's impressive Nvidia results came to a halt, with The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite mostly flat on Friday.

The dollar index increased to its highest level since March. After the speech, the DXY gained 0.4% at 104.42.

A strengthening U.S. dollar index can create headwinds for risk assets. It diminishes the risk-adjusted return associated with bitcoin, making the digital asset less palatable.

Powell reminded attendees of comments made at the same event last year that stopped a market rally in its tracks and kick-started 12 months of monetary tightening. He said this year's speech would be slightly longer, but that "the message is the same as last time."

"It is the Fed's job to bring inflation down to our 2% goal, and we will do so. We have tightened policy significantly over the past year, although inflation has moved down from its peak, a welcome development, it still remains too high," he added.

Since last year's Jackson Hole Symposium, the Federal Open Market Committee has raised the policy rate 300 basis points, including 100 basis points over the past seven months. The current Federal Funds Rate is 5.25-5.50%.

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