Cryptocurrencies and stocks both pushed lower following Fed Chair Jerome Powell’s speech today. Both cryptocurrencies and major stock indexes lost value this morning, as global market participants responded to the hawkish language that Federal Reserve Chair Jerome Powell used in his keynote speech at the Jackson Hole Economic Symposium.
The price of bitcoin, the largest digital asset by total market capitalization, fell more than 5% between roughly 9 a.m. EDT and noon.
Ether, the second-largest by total market value, dropped close to 7% in that time. The S&P 500, a benchmark group of stocks, lost more than 2% during the aforementioned time frame, according to Google Finance.
Risk assets suffered losses after Powell delivered his speech this morning during the second day of the Fed\u2019s annual symposium in Jackson Hole, Wyoming.
The central bank chair gave this speech around 10 a.m. EST, emphasizing that not only is price stability the \u201cresponsibility\u201d of the Fed, but that \u201cthe Federal Open Market Committee\u2019s overarching focus right now is to bring inflation back down to our 2% goal.\u201d
The FOMC, which has 12 members and meets eight times per year, formulates US monetary policy. This decision-making body is responsible for coordinating open market operations, which in turn have an impact on the federal funds rate, the benchmark rate of the central bank.
The Nasdaq Composite Index, a broader group of stocks, depreciated roughly 2.7% between opening and its intraday low, information from Google Finance showed.
During his speech, Powell made references to the use of aggressive policy, emphasizing that \u201crestoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance.\u201d
He noted the impact that such an approach could have on economic conditions, noting that \u201creducing inflation is likely to require a sustained period of below-trend growth.\u201d
The central bank chief noted that while higher interest rates can help bring price stability under control, they will create \u201csome pain\u201d for both households and businesses.
At the same time, Powell stressed that the alternative is worse, as \u201ca failure to restore price stability would mean far greater pain.\u201d
Era of Restrictive Policy
The Fed official went on to provide additional detail on the central bank\u2019s plans, stating that \u201cwe are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2%.\u201d
He mentioned the 75 basis-point rate hikes that have taken place in recent months, indicating that another large increase \u201ccould be appropriate\u201d when the next policy meeting takes place.
\u201cRestoring price stability will likely require maintaining a restrictive policy stance for some time,\u201d Powell stated. He also spoke to the high inflation that has been materializing in the US, claiming that it is \u201clargely a result of strong demand and constrained supply\u201d and emphasizing that \u201cwe are taking forceful and rapid steps to moderate demand.\u201d \u201cWe will keep at it until we are confident the job is done,\u201d he said in his final remarks.
\u2018A Very Hawkish Tone\u2019
Powell came out with a very hawkish tone today, probably the sternest speech so far and recommitted to curbing inflation even with high economic costs. \u201cIn fact, he said that the Fed is using the tools they have, \u2018forcefully.\u2019 This eludes to further pain down the road and could likely mean a, \u2018sustained period of below trend growth.
With more rate hikes likely in September, investors have taken a risk-off approach this morning in both the digital assets market and the stock market.
FOMC Direction in September Policy Meeting
The next policy meeting should shed further light on the plans of Fed officials, as they may opt to once again hike the federal funds rate. This benchmark rate may very well stay between 3% and 4% for the next few years, according to the results of the FOMC\u2019s June Summary of Economic Projections.
As part of this, members of the committee offered their predictions on what inflation, GDP and the unemployment rate will do in 2022, 2023 and 2024. Further, they included a forecast for the federal funds rate, with the median prediction being that it will be 3.4% this year, 3.8% next year and 3.4% the following year.
<\/p>\n","protected":false},"excerpt":{"rendered":"
Cryptocurrencies and stocks both pushed lower following Fed Chair Jerome Powell’s speech today. Both cryptocurrencies and major stock indexes lost value this morning, as global market participants responded to the hawkish language that Federal Reserve Chair Jerome Powell used in his keynote speech at the Jackson Hole Economic Symposium.The price of bitcoin, the largest digital …<\/p>\n","protected":false},"author":13,"featured_media":31837,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[6827,49,37,36],"tags":[9358,9935,7163,7164,8476],"class_list":["post-70996","post","type-post","status-publish","format-standard","has-post-thumbnail","","category-daily-economic-reports","category-economic-reports","category-forex-markets","category-market-updates","tag-hawkish-stance","tag-jackson-hole","tag-jerome-powell","tag-powell","tag-risk-assets"],"_links":{"self":[{"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/posts\/70996","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/comments?post=70996"}],"version-history":[{"count":2,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/posts\/70996\/revisions"}],"predecessor-version":[{"id":71000,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/posts\/70996\/revisions\/71000"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/media\/31837"}],"wp:attachment":[{"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/media?parent=70996"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/categories?post=70996"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/noortrends.ae\/en\/wp-json\/wp\/v2\/tags?post=70996"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}