Cryptocurrencies and major stock indices fell in value this morning as global market participants reacted to the hawkish language that Federal Reserve Chairman Jerome Powell used in his Scheduled speech to Jackson Hole Economic Symposium.
The price of bitcoin, the largest digital asset by total market capitalization, fell more than 5% between approximately 9 a.m. EDT and noon, TradingView Numbers To display.
Ether, the second in total market value, fell almost 7% during this period, more Data from TradingView revealed.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
The S&P 500, a benchmark group of stocks, lost more than 2% during the aforementioned period, according to Google Finance.
The Nasdaq Composite Index, a broader group of stocks, depreciated about 2.7% from the open to its intraday low, news from Google Finance show.
These risky assets suffered losses after Powell delivered his speech this morning on day two of the Fed’s annual symposium in Jackson Hole, Wyoming.
The central bank chairman delivered the speech around 10 a.m. EST, stressing that not only is price stability the “responsibility” of the Fed, but that “the overriding goal of the Federal Open Market Committee right now is to bring the inflation to our 2% target.”
The FOMC, which has 12 members and meets eight times a year, formula US monetary policy. This decision-making body is responsible for coordinate open market operationswhich in turn impact the federal funds rate, the central bank’s benchmark rate.
During his speech, Powell referred to the use of aggressive policy, stressing that “restoring price stability will take some time and will require using our tools forcefully to better balance supply. and demand”.
He noted the impact such an approach could have on economic conditions, noting that “reducing inflation will likely require an extended period of below-trend growth.”
The central bank chief noted that while higher interest rates can help tame price stability, they will create “some pain” for households and businesses.
At the same time, Powell pointed out that the alternative is worse, because “a failure to restore price stability would mean far greater pain.”
The Fed official went on to provide additional details on the central bank’s plans, saying that “we are deliberately moving our policy to a level that will be restrictive enough to bring inflation down to 2%.”
He mentioned the 75 basis point rate hikes that have taken place in recent months, indicating that another large increase “may be appropriate” at the next policy meeting.
“Restoring price stability will likely require tight policy to continue for some time,” Powell said.
He spoke of the high inflation materializing in the United States, saying it is “largely the result of strong demand and limited supply” and stressing that “we are taking strong and rapid action to moderate demand”.
“We will continue until we are confident the job is done,” he said in his closing remarks.
“A very belligerent tone”
Brett Sifling, Investment Advisor for Gerber Kawasaki Wealth and Investment Managementresponded to these statements.
“Powell came out with a very hawkish tone today, probably the toughest speech yet, and recommitted to reining in inflation even with high economic costs,” he said.
“In fact, he said the Fed is using the tools at its disposal, ‘forcefully.’ That escapes more pain down the road and could likely mean a ‘sustained period of below-trend growth,'” Whistling.
“With further rate hikes likely in September, investors took a risk-free approach this morning in both the digital asset market and the stock market,” he said.
September policy meeting
The upcoming policy meeting should shed more light on Fed officials’ plans as they may choose to raise the fed funds rate again.
This benchmark rate could very well stay between 3% and 4% for the next few years, according to the results of the June FOMC survey. Summary of Economic Projections.
Within this framework, the members of the committee offered their forecasts of what inflation, GDP and the unemployment rate will do in 2022, 2023 and 2024.
Additionally, they included a forecast for the federal funds rate, with the median forecast being that it will be 3.4% this year, 3.8% next year and 3.4% the following year.
Disclosure: I own bitcoin, bitcoin cash, litecoin, ether, EOS