Friday’s Speech Could Signal Imminent Rate Cut

Over two and a half years after initiating an historic cycle of monetary tightening, U.S. Federal Reserve Chairman Jerome Powell is expected to indicate that the central bank is preparing to ease its policies. Powell’s highly anticipated keynote address is scheduled for Friday at 10 a.m. ET during the Kansas City Fed’s Jackson Hole Economic Symposium, a forum where significant shifts in central bank policy have often been hinted at by past Fed chairs, including Powell himself.

As is often the case, financial markets have moved ahead of the Fed’s official stance, with traders already pricing in a 100% likelihood of at least a 25 basis point rate cut at the Fed’s September meeting. The release of the Federal Open Market Committee (FOMC) minutes from the Fed’s July policy meeting further bolstered these expectations, noting that a “vast majority” of participants view a September rate cut as likely appropriate.

In addition to signaling a September cut, most analysts expect Powell to adopt a cautious tone regarding future policy easing. This would likely involve indicating that the Fed will implement a modest 25 basis point cut in September, while advising markets not to anticipate a series of continuous rate cuts in subsequent meetings.

Despite a brief stumble in the markets from mid-July to early August, U.S. stocks have largely remained in bullish territory as the easing cycle approaches. The S&P 500 is currently just 1% below its record high reached in early July, and the Nasdaq is only slightly more than 4% below its peak. Gold has also been on the rise, recently hitting a record high of $2,566.

Bond markets are reflecting optimism as well, with the 10-year U.S. Treasury yield dropping to a multi-year low of 3.77% yesterday.

Bitcoin (BTC), however, has struggled to gain momentum. Although it has recovered from the early August dip that briefly pushed prices below $50,000, Bitcoin remains at $60,800—well below its all-time high of approximately $73,500 reached back in March.

Despite this, Bitcoin has seemingly overlooked several positive developments, including increasing institutional interest and continued inflows into spot ETFs. This week, Bitcoin also received potential regulatory good news, with ABC News reporting that crypto-friendly Robert Kennedy Jr. might withdraw from the presidential race on Friday and endorse the similarly pro-crypto GOP candidate, Donald Trump. Meanwhile, a top official in Kamala Harris’s campaign suggested that a Harris administration would be far more favorable to the crypto industry than the current Biden administration.