Bitcoin drops on hawkish Fed remarks on August 28. The asset fell after Chair Kevin Warsh’s Jackson Hole speech.
BTC has slightly recovered to trade just below $80,000. Nevertheless, traders increased rate-hike bets.
Why Bitcoin drops on hawkish Fed
Kevin Warsh struck a hawkish tone in his speech. He said the inflation numbers are concerning. The Fed’s focus should be on prices right now.
He cited PCE and CPI inflation data. These are running well above the Fed’s 2% target. “While this summer’s PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved,” Warsh said.
He added that they must be confident underlying inflation is moving toward their objective. Otherwise, they have work to do. This signaled they could hike rates if necessary.
Fed President Beth Hammack also called for rate hikes. She noted inflation is running well above the 2% target. Hammack backed a hike at the July FOMC meeting. The majority voted to hold rates steady nevertheless.
Commenting on the July decision, Warsh said they preferred to wait for new information. They then decided whether a change was advisable. He added that they have expressed joint readiness to act.
Rate hike bets increase
Bitcoin fell as traders increased rate-hike bets. The leading crypto trades around $77,2988. It is down nearly 3% today from an intraday high above $80,000.
Polymarket data shows a 68% chance of a rate hike this year. This is up from below 50% as of last week. Traders also increased bets that the hike will happen as soon as September.
The odds of a 25 bps September rate hike now stand at 50%. There is a 51% chance the Fed will keep rates unchanged. August CPI and PPI inflation data will be released before the September FOMC meeting. This will likely influence the rate decision.