Bitcoin’s price surged on Friday after Federal Reserve Chairman Jerome Powell suggested that interest rate cuts may be on the horizon. Speaking at the Jackson Hole Economic Policy Symposium, Powell indicated that the Fed is increasingly satisfied with the current cooling of inflation and is now more focused on growing weaknesses in the labor market.
Powell emphasized that the pace and timing of future rate cuts will be determined by incoming economic data and the evolving outlook. Following his comments, Bitcoin’s price rose by 1.8% to $61,500, briefly surpassing $62,000. Other cryptocurrencies like Ethereum and Solana also saw gains, rising 2.7% and 2.1%, respectively.
Market confidence in a potential easing of the Fed’s inflation-fighting stance has grown, with traders predicting a 67% chance of a 0.25% rate cut in September. This comes after the Fed kept interest rates steady since July 2023, following a series of rate hikes aimed at curbing inflation, which peaked at 9.1% in June 2022.
Leena ElDeeb, a research associate at 21Shares, pointed out that rate cuts typically benefit risk-on assets like Bitcoin by expanding investor appetite as borrowing costs decrease. She added that Powell’s remarks have reassured markets that the Fed is prepared to adjust its policy if economic conditions warrant it.
Powell also reflected on the challenges the Fed faced during the inflation surge and the tight labor market. He noted that while some expected a recession would be necessary to control inflation, it now appears unlikely that the labor market will contribute to further inflationary pressures.
With inflation slowing to 2.9% over the past year and unemployment rising to 4.3%, the Fed has managed to temper hiring without severely impacting the economy. Powell concluded by noting that while the risks to inflation have diminished, the risks to employment have increased, signaling a cautious approach moving forward.
Credit: Decrypt (Text Excluding Headline)
