Jerome Powell began his much-anticipated speech at Jackson Hole, Wyoming. Powell gave a not-so-optimistic signal about rate cuts, while emphasizing the high level of uncertainty making the job of monetary policymakers challenging.

Powell Signals Rate Cut

Key highlights from Powell's speech at the Jackson Hole symposium are as follows:

When I took the podium a year ago, the economy was at a turning point. Our policy interest rate has ranged between 5.5% and 5.5% for over a year. This restrictive policy stance is appropriate to help reduce inflation and maintain a sustainable balance between aggregate demand and aggregate supply. The upside risk for inflation has eased.

But this year, the economy is facing new challenges. Significant tariffs among our trading partners are reshaping the global trade system.

While the labor market generally seems balanced, this state of balance is quite strange, arising from significant declines in both labor supply and demand.

This unusual situation indicates increasing risks to the labor market.

Regarding inflation, the latest data shows that the 12-month PCE inflation rose by 2.6% in July. Core inflation increased by 2.9%.

The labor supply has weakened in accordance with demand.

The risk balance is shifting. Currently, the policy is in a restrictive zone, and the changing basic outlook and risk balance may require us to adjust our monetary policy stance.

"Tariffs pose the risk of inflation flaring back up, and a recession remains a scenario that the Fed needs to avoid. However, the baseline scenario is that we believe the impact of tariffs on inflation will only be temporary."

Powell's speech appeared cautious and moderate, hinting at the possibility of rate cuts but not committing to a definitive cut.

The Kobeissi Letter assesses that the Fed will cut rates by 25 basis points in September and "blames" the labor market for this.

Powell's Remarks on Trump

Although Powell did not specifically mention the White House's call for rate cuts, he emphasized the importance of the Fed's independence.

"FOMC members will make this decision entirely based on data and its impact on the economic outlook as well as risk balance. We will never change this approach," Powell said.

Bitcoin is Rising

Before Powell's speech, Bitcoin's price had dropped below $112,000, hitting a 1.5-month low. Below is the price movement of Bitcoin during Powell's speech:

The Fed Chair's speech at the annual conference of central banks takes place amid increasing instability surrounding the economy and interest rate policy. Expectations for a rate cut in September are rising again, with a 25 basis point cut priced in at 89.4%. The likelihood of keeping rates unchanged is priced at 10.6%.