The bitcoin price fell sharply toward $20,000 per bitcoin, down more than 10% over the last week, with ethereum and other top ten cryptocurrencies BNB
Now, with the bitcoin and crypto market now teetering on the verge of crashing under $1 trillion, traders are braced for a highly-anticipated speech by Federal Reserve chair Jerome Powell at the Jackson Hole central banking conference in Wyoming next week.
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“Powell will want to err on the hawkish side,” Tim Magnusson, chief investment officer at hedge fund Garda Capital Partners, told Bloomberg, adding that restoring price stability is the top priority. “The flattener will be in play until the Fed stops tightening.”
Powell is due to speak on Friday August 26 at 10am ET and is expected talk about the economic outlook.
The Federal Reserve embarked on a program of interest rate hikes and stimulus cuts late last year in an attempt to drive down soaring inflation that’s rocketed to a 40-year high. The monetary policy tightening has crashed stock markets and wiped around $2 trillion from the red-hot crypto market that had surged to a peak of $3 trillion in 2021.
This week, officials gave somewhat conflicting views over the Fed’s path forward with St. Louis Fed president Jim Bullard urging another 75 basis point rate increase at the Fed’s September meeting and Kansas City’s Esther George striking a more dovish tone.
“I don’t really see why you want to drag out interest rate increases into next year,” Bullard told the Wall Street Journal, adding he thinks the Fed “should continue to move expeditiously to a level of the policy rate that will put significant downward pressure on inflation.”
George, who is hosting next week’s Jackson Hole Fed policy retreat, on Thursday said policy-makers should be mindful of how earlier decisions are affecting the economy.
“We have done a lot, and I think we have to be very mindful that our policy decisions often operate on a lag,” George said in comments reported by Bloomberg.
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Market watchers are paying close attention to comments made by Fed decision-makers who fear the U.S. central bank could trigger a recession if it goes too hard and fast in its war against inflation.
“Recession fears are being heightened, not least because the U.S. Federal Reserve seems fixated on further ramping interest rates, which while aimed at bringing inflation under control, stirs up further questions of the economy’s ability to pick itself up,” Sophie Lund-Yates, an analyst with brokerage Hargreaves Lansdown, wrote in emailed comments.
This week, the Fed’s latest meeting minutes showed officials saw “little evidence” inflation pressures were easing. However, Federal Open Market Committee (FOMC) participants fear prolonged interest rate hikes could damage the economy.
“Investors are trying to figure out which way to jump amid a slew of conflicting data,” Danni Hewson, an analyst with investment platform AJ Bell.
“While the last Fed minutes were delivered in a far more dovish tone than has been used of late, it also seems that central bankers are determined to keep an iron grip on inflation even if they’ve covered the hand with a velvet glove. Comments that it could rein in the pace of rate rises ‘at some point’ have left investors in a bit of a quandary, and the latest jobs figures will only have served to exacerbate that.”