Federal Reserve Chair Kevin Warsh used his first major address at Jackson Hole to deliver a clear message: inflation is not yet under control, and the central bank stands ready to act further if price pressures persist. His remarks triggered a broad repricing across financial markets, with risk assets such as bitcoin and commodities feeling the brunt.
Warsh: 'We have work to do' on inflation
Speaking at the annual economic symposium, Warsh said recent inflation readings, while better than expected, have not shown a meaningful improvement in underlying trends. He reiterated the Fed's commitment to its 2% target, calling it a “firm and fixed target,” and set a high bar for easing: “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.”
Warsh also noted that financial conditions are not currently restrictive, and he described interest rates as the Fed's “predominant tool.” He stopped short of committing to a specific move at the September meeting, but markets quickly adjusted. The implied probability of a September rate hike jumped from around 36% before the speech to above 50% afterward, according to federal funds futures.
The Fed will receive the August consumer price index on September 11, just days before its September 15-16 policy meeting, giving officials fresh data to weigh.
Bitcoin slips below $80,000
Bitcoin fell as much as 3.2% to $77,427, according to CoinGecko, after Warsh's comments pushed short-term Treasury yields higher and dampened risk appetite. The cryptocurrency remains well below its record high of about $126,000 from last October, though it is still above levels seen earlier in August.
Wintermute OTC trader Jasper De Maere described the market reaction as relatively contained, calling the speech a “slight hawkish tilt” that was broadly in line with expectations. Meanwhile, Galaxy Digital noted that in four of the five completed crypto bear markets, the bottom was definitively set after the 50-week moving average was first broken to the upside, a technical signal investors are watching closely.
Adding to potential volatility, $6.4 billion in bitcoin options were set to expire on Deribit, which could force market makers to adjust positions.
Gold and silver drop as rate-hike bets rise
Gold prices fell nearly 3% on Friday, with spot gold down 3.13% to $4,457.17 an ounce, while US gold futures for December settled 3.35% lower at $4,529.90. For the week, gold was down 2.9%, after touching a record-related high of $4,696.18 on Tuesday.
Higher interest rates typically weigh on gold, which pays no yield, and a stronger dollar made the metal more expensive for overseas buyers. Silver fell 3.5%, platinum slipped 0.6%, while palladium bucked the trend with a 5.3% gain.
Oil extends weekly losses
Oil prices also moved lower, with Brent crude down 0.37% to $89.37 a barrel and West Texas Intermediate off 0.18% to $83.38. Both benchmarks were on track for weekly declines—Brent down about 5.38% and WTI off 4.47%—as traders weighed the prospect of a more hawkish Fed against improving supply conditions.
Price Futures Group senior analyst Phil Flynn attributed part of the decline to Warsh's comments. At the same time, efforts to restore shipping through the Strait of Hormuz are progressing. Seven commodity vessels transited the strait on Thursday, below the 10-day average of 15, but Goldman Sachs estimated Gulf oil exports at 15-16 million barrels per day, still below pre-war levels but above the lowest point reached in March.
In a separate development, US officials are reportedly working on a deal for long-term access to part of Venezuela's crude reserves, and Venezuela is considering leaving OPEC, which could reshape supply dynamics.
For more on the Fed's stance, see Warsh's inflation warning and sticky core PCE data. Also, check gold's support levels and pre-speech market moves.
This article is for informational purposes only and does not constitute financial advice.
