Powell confirms September rate cut, stocks and cryptos rally

Federal Reserve Chair Jerome Powell on Friday clearly signaled that the central bank will cut interest rates at its next policy-setting meeting in September. 

He did not indicate as to the size of the cut, but he assured markets that the Fed is committed to preventing additional weakening in the labor market. 

“The time has come for policy to adjust,” Powell said during a keynote address at the Kansas City Fed’s annual conference in Jackson Hole. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

Equities immediately reacted well to Powell’s comments, which were largely anticipated. The Dow Jones Industrial Average gained as much as 1% in the half hour after Powell took the podium, while the S&P 500 and Nasdaq Composite indexes gained 0.7% and 0.9%, respectively. 

Bitcoin (BTC) and ether (ETH) were also in the green following the speech. Bitcoin rallied as much as 2.2% before 11 am ET before paring gains, according to data from Coinbase. The largest cryptocurrency was trading around $61,000, up 0.5% over 24 hours, at time of publication. Ether was trading 1.8% higher over the past 24 hours at time of publication, per Coinbase. 

Powell’s remarks come days after new revisions data from the Bureau of Labor Statistics suggests that the economy added 818,000 fewer jobs in the 12 months ended March 2024 than were initially reported. 

Read more: Eyes and ears on Jackson Hole ahead of Powell address

Powell on Friday reiterated that central bankers “do not seek or welcome further cooling in labor market conditions,” and will therefore act accordingly by lowering interest rates in September. He expressed confidence that labor market strength could be maintained by a “dialing back of policy restraint.”

“It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon,” he added. 

Fed fund futures markets showed a 65% chance of a 25 basis point cut next month, down from expectations just one day ago of 76%, according to data from CME Group.

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