🔥 At Jackson Hole 2025, Fed Chair Jerome Powell sent shockwaves through the markets with one key message: the Fed may cut its benchmark rate by 25 basis points in September. However, he was clear – this is not the start of a prolonged easing cycle.

Powell admitted that monetary policy is currently in a “tight zone,” caught between the risks of weakening employment and the challenge of curbing inflation. More importantly: the Fed has officially abandoned its “makeup strategy” – shifting toward a more flexible approach to deal with the new reality.

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1️⃣ Will the Fed Cut Rates in September?

✔️ High probability of a 25bps cut – aimed at cushioning the U.S. economy against rising uncertainties.

❌ But this is not a “golden ticket” to a long rate-cutting cycle.

💬 Powell emphasized: the labor market remains strong, and the Fed cannot loosen policy continuously. This is a balancing act – supporting growth while keeping inflation in check.

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2️⃣ Tariffs – A Double-Edged Sword for Inflation 💣

Powell warned that tariffs are driving consumer prices higher, adding pressure on inflation and raising the risk of stagflation.

• Higher import costs → higher retail prices → consumers under strain.

• The Fed must tread carefully: respond too slowly → inflation resurges; act too aggressively → growth collapses.

⚠️ Avoiding stagflation is the Fed’s top priority.

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3️⃣ Strategy Update – AIT Is Dead ☠️

• Makeup strategy (2020): allowed inflation to run above 2% to offset prior undershoots.

• 2025: A very different world – high inflation, high rates, volatile trade.

👉 The Fed is now adopting a flexible, fast-moving approach to keep inflation expectations anchored.

💬 Powell stated: “We are strongly committed to ensuring long-term inflation expectations remain firmly anchored.”

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4️⃣ Market Reactions 🌍

• U.S. Stocks: surged, Dow Jones climbed above 45,548, up over 600 points – a fresh all-time high.

• Crypto: expectations of lower rates boosted liquidity → both equities and BTC/ETH rallied.

• Investors: excited, but aware the Fed remains cautious. The road ahead is still full of risks.

💬 A Q3/2025 analyst noted: “Rate cuts will improve liquidity and risk appetite, which is strongly supportive for crypto markets.”

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5️⃣ Burning Questions 🔥

❓ Will the Fed definitely cut in September?

→ Very likely, but not the start of a long easing cycle.

❓ How severe is the tariff impact?

→ Tariffs drive up consumer prices, intensifying inflation and raising stagflation risks.

❓ Why scrap the makeup strategy?

→ Because the backdrop has changed: high inflation, tariffs, and global trade dynamics.

❓ How does crypto react?

→ Liquidity rises, money flows into risk assets → BTC/ETH benefit directly.

❓ What’s the Fed’s plan for inflation?

→ Act decisively, adjust flexibly, and keep long-term inflation expectations stable.

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🎯 Conclusion – The Fed’s Tightrope Walk

The Fed is walking a fine line: cutting rates to support the economy, but not so much that inflation returns.

📌 September could mark a turning point – and Bitcoin may emerge as one of the biggest beneficiaries as investors hunt for liquidity.