At 10 PM tonight (Taiwan time), Federal Reserve Chairman Powell will deliver a speech at the Jackson Hole Global Central Bank Annual Meeting in Wyoming. This annual event, closely watched by global financial markets, not only relates to the direction of U.S. monetary policy but may also influence the recent volatility in the cryptocurrency market.
Powell's Speech: Rate Cut Expectations and Market Suspense
The annual Jackson Hole Economic Policy Symposium is a 'feast of ideas' for global central bank officials and economists. This year’s theme focuses on 'Labor Market Transformation: Demographics, Productivity, and Macroeconomic Policy,' with the meeting running from August 21 to 23 (starting at 8 AM today, Beijing time). Powell's speech tonight is regarded as a 'preliminary battle' for the Fed's rate decision meeting in September.
The current U.S. economy is in a delicate stage: core inflation has decreased significantly from the 2022 peak but remains above the 2% target; the labor market shows signs of cooling, with rising unemployment and slowing job growth, raising market concerns about a recession. Against this backdrop, the market generally expects Powell to signal a rate cut - most predict a possible 25 basis point cut in September to support economic growth.
However, some Federal Reserve officials are cautious, fearing that premature rate cuts could reignite inflation. Goldman Sachs predicts that Powell may not directly commit to a September rate cut but will emphasize 'data-driven' decisions; if subsequent employment and inflation data continue to weaken, the probability of a rate cut will increase.
Three Key Points to Watch in the Speech:
Economic Outlook: Powell may mention progress on the labor market 'soft landing,' acknowledge employment slowdown but avoid excessive pessimism, while also discussing the stickiness of inflation - although current core inflation has dropped to around 3%, price pressures in the service sector persist. Optimistic wording could be interpreted as a rate cut signal, while emphasizing 'more data needed' may delay expectations.
Interest Rate Path: The market is concerned about the number of rate cuts remaining in 2025 (Wall Street predicts 2-3 times). If Powell mentions a 'higher for longer' interest rate policy, the stock and crypto markets may come under pressure. As this may be his last Jackson Hole speech during his term (ending in May 2026), he might also discuss potential reforms to the Federal Reserve's framework.
Risk Assessment: May involve the impact of geopolitical risks such as U.S.-China trade and Middle East conflicts on the U.S. economy, as well as the role of AI in productivity, echoing the theme of the annual meeting.
Historically, Powell's Jackson Hole speeches have often led to market volatility: in 2022, he warned of 'painful adjustments' leading to a sharp decline in the stock market, while in 2024, hints of rate cuts boosted the market; tonight, the market needs to be wary of severe fluctuations.
Other Highlights of the Annual Meeting: Labor Market, AI, and Central Bank Independence
In addition to Powell's speech, there are three other focal points at this year's meeting:
Demographic Impact: The first day’s agenda discusses global labor market demographic trends, such as aging in Japan and Europe, the impact of immigration policies on the workforce, and the issue of baby boomer retirements exacerbating labor shortages in the U.S., all of which could be related to the Federal Reserve's employment goals.
AI and Productivity: The theme of the annual meeting emphasizes productivity, with panel discussions focusing on how AI is reshaping the labor market - analyzing the potential of AI to enhance efficiency while remaining cautious about the unemployment risks brought by automation.
Central Bank Independence: In the context of criticism of the Federal Reserve from political figures like Trump, the meeting may discuss how central banks can maintain independence; the attendance of officials from the European Central Bank and the Bank of Japan will also provide a global perspective.
Crypto Market: Panic Bottomed Out? Waiting for Policy Signals
The recent pullback in the cryptocurrency market has made investors uneasy, with the Fear and Greed Index dropping to the 'Fear' range (45) on Wednesday, but it has since rebounded to neutral (50) at the time of writing.
Bitcoin surged to $124,000 in the third quarter, but then pulled back nearly 10% due to profit-taking and macro pressures, currently fluctuating around $112,000.
Ethereum rebounded from $4,000, rising 6%.
Demand for ETFs and crypto bonds has significantly declined recently, coupled with over $1 billion in liquidations within three weeks, putting pressure on market sentiment.
However, analyst Tom Lee believes that 'the worst may be over,' judging that Bitcoin and Ethereum may have already 'bottomed out,' and even predicting that the stock market may also bottom out on Friday.
Options market signals are also somewhat positive: bullish options bets for 1 week and 1 month remain higher than bearish options, with traders increasing bets on Bitcoin rebounding to $124,000 - $130,000. However, if Powell sends hawkish signals (for example, emphasizing maintaining high rates), it could still dampen market sentiment.
Tonight's Jackson Hole speech will be crucial for testing the resilience of the crypto market. Regardless of whether the rate cut signals are clear, the market has entered a 'policy-sensitive period' - for investors, closely monitoring every word from Powell could potentially unlock the next wave of market movements.
