Key Takeaways:
Bitcoin rose toward $81,000 ahead of Fed Chair Kevin Warsh's first Jackson Hole keynote, with core inflation running at 3.3 percent.
Gregory Daco, chief economist at EY-Parthenon, said there is a "tremendous degree of uncertainty" over what Warsh will say in his debut address, with markets seeking clarity on the Fed's rate path.
The Fed left its benchmark rate unchanged at 3.5 percent to 3.75 percent in July on a 9-3 vote, with three dissenters favoring a quarter-point hike. Core PCE inflation held at 3.3 percent year over year in July, while the headline gauge stayed at 3.7 percent, both well above the Fed's 2 percent target. The CME FedWatch tool prices a 45 percent chance of a hike by December, versus a 27.3 percent chance rates hold through year-end.
A hawkish tone from Warsh could push Bitcoin below key support, while a dovish signal may fuel a break above $81,000. The FOMC next meets in mid-September, with markets pricing roughly a 60 percent chance the Fed holds rates steady.
Warsh, confirmed as Fed chair in May, has dismantled the Fed's forward guidance, removing forward-looking language from post-meeting statements and convening a panel to review communications. His reluctance to signal policy has left investors guessing, a stance that has contributed to a recent rise in bond yields as traders demand more transparency. The Jackson Hole venue has historically been used by Fed chairs to set policy tone — Jerome Powell unveiled a new monetary policy framework there in 2020 and later used the stage to pledge a fight against inflation, according to Reuters.
The bond market's anxiety has been compounded by Treasury Secretary Scott Bessent's decision to expand long-term debt buybacks, an intervention that some analysts say complicates the Fed's messaging. Rising yields on U.S. government debt and a weakening dollar add to the inflation backdrop that Bitcoin traders are weighing.
Inflation has now run above the Fed's 2 percent target for more than five years, according to Reuters, with the Iran war adding to price pressures. An FT poll of academic economists found more than 60 percent expect inflation to take longer to return to target than previously thought.
For Bitcoin, the $81,000 level marks a psychological resistance point. A decisive break above it on dovish signals could open the path toward new highs, while a hawkish surprise risks a pullback toward lower support. Ether, the second-largest cryptocurrency, has tracked Bitcoin's moves in recent sessions, and traders are watching the dollar index and Treasury yields for direction.
This article is for informational purposes only and does not constitute investment advice.
