Federal Reserve Chairman Jerome Powell has urged households and businesses to factor inflation into their financial decisions because it will take time and effort to return inflation to ideal levels.
In his speech, Mr. Powell said:
“Price stability is the foundation of the economy. Without price stability, the economy will not work for anyone.”
Fed Chair Powell argued that one month’s improvement would not be enough to bring inflation back to 2% and that “it will take some time and means to restore price stability.” [FED] Tools to force.
He added that there would be “some pain for households and businesses” in the medium term, as “failure to restore price stability would mean much more pain”.
Bitcoin’s price dropped 2% during Chairman Powell’s speech, giving up most of the gains made in US pre-market trading.
Ahead of the event, macroeconomist and former investment banker Alfonso Peccatiello said in a tweet on Aug. 24 that the speech could be “a defining moment for Fed policy.” .
He predicted that Chairman Powell would have to “win this credibility battle.”
Pecatiello further said before his speech that stocks face the biggest risks. He said:
“[Equities are] It is the most vulnerable place from a risk/reward perspective before the Event. “
Jackson Hole could be a defining moment for Fed policy and thus the market in 2022.
How are bond markets preparing for the event?
And what are the most likely outcomes?
— Alf (@MacroAlf) August 24, 2022
Baron’s also notes that “the Jackson Hole symposium is often the venue for major Fed announcements.” Still, they theorized that there would be no “big policy news” to surprise the market this time.
Financial news outlets theorized that Jackson Hole could revive the market rally, but that “pMany strategists warn of hawks Powell. “
European markets seem to have had similar readings to CNBC report The “All-European Stox 600″ fell 0.4% by early afternoon, recovering an opening gain of about 0.5%. Basic resources rose 1.2% and travel and leisure stocks 1.5%. % dropped.”
Crypto markets and the S&P 500 were relatively bullish in early morning trading, with Bitcoin up 2% and $SPY up 0.61% in pre-market trading.
The latest PCE inflation was softer than expected, and Bitcoin reacted positively to Chairman Powell’s final comments at the Fed meeting in July. Inflation was his lowest annual gain since October 2021. Then at his FOMC meeting in September his chances of a 75 bps rise dropped to 55%.
Fallout from Jackson Hole
The above predictions are consistent with Chairman Powell’s speech, which did not reveal new monetary policy but reaffirmed the Fed’s commitment to lowering inflation.
Powell said central banks would still have to shoulder the burden of combating inflation, but households and businesses would need to factor the current level of inflation into their decisions.
Powell’s hawkish outlook may indicate that the Fed doesn’t think it can keep inflation down in the medium term.
With his remarks urging households and businesses to factor inflation into their financial decisions, you might wonder if this is a nod to Bitcoin. Powell has never publicly advocated Bitcoin as an inflation hedge. However, the FED chairman is now urging people to accept the existence of inflation, and it could continue for some time.
Bitcoin is an asset with unique properties that respond to inflation. Will it see an increase in volume, as Powell concedes that inflation must be a factor in the current monetary strategy?
Update: Bitcoin fell further in the minutes following the speech, losing support at $21,000, down 4% from the daily high of $21,900.