Jerome Powell is set to deliver what most certainly is to be his last keynote address as Fed Chair at Jackson Hole, Wyoming. To say his speech, titled “Economic Outlook and Framework Review,” will be watched closely by the economic experts and the crypto industry, would be an understatement.
It is expected to make a huge impact on the crypto industry as the main subject that has all attention is the interest rate in the US.
Interest Rate Cut in Powell’s Speech?
In his previous Jackson Hole speeches, starting from 2018, he managed to make great shifts in the US economy. Experts anticipate that the Fed is likely to keep interest rates high for a little longer. They expect a rate cut later this year.
While some experts are supporting an interest rate cut, others, like Beth Hammack, the President of the Cleveland Federal Reserve, are opposing it. She does not support lowering the interest rate right now because the inflation (rising prices) is still too high. Her hawkish stance on the rate cut did not directly address the crypto market, but it made the investors nervous.
Goldman Sachs economist David Mericle wrote in a commentary, “We do not expect Powell to decisively signal a September cut, but the speech should make it clear to markets that he is likely to support one.”
How Does It Impact Crypto?
- Lower interest rates reduce borrowing costs and encourage more capital flow. It often leads to increased demand and higher prices for digital assets such as Bitcoin and altcoins, as investors seek better returns than traditional investments.
- While rate cuts can boost crypto prices, they may also increase market volatility. It can cause sharp price swings and higher transaction fees during times of rapid price movement.
- It also makes assets like crypto more appealing as the US dollar weakens. During the time of high inflation and rate cuts, cryptocurrencies like Bitcoin are referred ad “digital gold.” It can also attract more institutional investors and lead to clarity in cryptocurrency.
Appreciation for Powell
Despite harsh criticism from President Trump earlier this year, Powell didn’t budge from his stance on interest rates. This leadership has been praised by several notable experts.
Michael Arone, chief investment strategist at State Street Global Advisors, told CNBC News, “He’s done a good job in terms of keeping the Fed’s independence, ignoring the noise and some of the questions he gets, and keeping it focused on the data dependency and the Fed’s dual mandate.”
“He’s taken the high road as it relates to the Fed’s independence and some of the pressure he’s clearly getting from the Trump administration. So I think that he’ll continue to kind of walk that line,” he added.
