What to Expect from Jerome Powell speech at Jackson Hole on Friday

One of the top reasons why stocks and the crypto market have plunged this week is the anticipation of the upcoming speech by Jerome Powell at the Jackson Hole Symposium in Wyoming.

Bitcoin (BTC) price has crashed to $113,000, down from this month’s high of $124,200. Ethereum (ETH) crashed to $4,200, while the market capitalization of all cryptocurrencies retreated to $3.8 trillion. 

The stock market has also retreated, with the Nasdaq 100, S&P 500, and Dow Jones falling by over 0.50%. 

Jerome Powell speech at Jackson Hole Symposium

Bitcoin, altcoins, and the stock market will react to the closely-watched Jerome Powell’s speech at the Jackson Hole. This is an annual event that brings together economists, central bankers, and other policymakers to deliberate the global economy. 

The Fed chair’s statement is the main event that most investors and traders watch. Historically, the Fed chair uses the event to provide guidance on the last three central bank meetings of the year.

This week’s speech will be watched closely because there are signs that the U.S. is moving toward stagflation due to Donald Trump’s tariffs.

Bureau of Labor Statistics data released this month showed that the labor market has deteriorated recently. The unemployment rate rose to 4.2%, while the economy created just 73,000 jobs in July.

Two separate reports showed that inflation remained steady in July before Trump adjusted his tariff rates. The core Consumer Price Index rose to 3.1%, while the Producer Price Index jumped to 3.6%.

Market participants believe that the Fed will cut interest rates in this meeting. Polymarket odds for a cut are at 70%, while the CME FedWatch tool has it at 85%. 

Powell will likely change his tune and pivot toward a cut in September, pointing to the softening of the labor market. He will also emphasize that monetary policy will remain restrictive even after the 25 basis point cut.

While the Fed chief’s statement will be important, the main market-moving event will be on September 5, when the U.S. publishes the nonfarm payrolls, and on September 11, when the BLS publishes the CPI data.

Implications for the crypto market

Like other assets, the crypto market is sensitive to Jay Powell’s statements. In theory, a sign that he is leaning toward a cut in the September meeting will be bullish for the industry. It will also be bullish for the stock market.

Low interest rates boost the stock and crypto markets by triggering a rotation from the bond market to riskier ones. A good example of this is what happened during the pandemic, when the Fed brought rates to zero and launched quantitative easing.

The two markets may also rebound even after a hawkish statement by Powell. Since they have dropped before the speech, it is likely that they will bounce back when the speech ends as investors buy the dip.