On Tuesday (August 25), Bitcoin (and to an even greater extent, most altcoins) are under pressure due to the uncertainly over Federal Reserve Chair Jerome Powell’s speech on Thursday (August 27) at this year’s (virtual) Jackson Hole Economic Symposium.
This annual symposium, which is sponsored by the Federal Reserve Bank of Kansas City, has been held in Jackson Hole, Wyoming since 1981, but due to the current COVI-19 pandemic, this year, this will be a virtual conference.
According to a report by CNBC, Powell “is likely to detail a set of measures aimed at pushing inflation higher” to “a healthy level” during a speech titled “Monetary Policy Framework Review.”
In case you are wondering why the Fed might be aiming for higher inflation in the U.S., here is CNBC’s explanation:
“While the average consumer might find it absurd to want to raise the cost of living, central bankers and economists see too little inflation also as a problem.
“It often reflects a slow-moving economy with a low standard of living. On top of that, the accompanying low interest rates give policymakers little wiggle room when crises happen and there’s a need to loosen policy.”
The CNBC report says that Krishna Guha, Vice Chairman of Evercore ISI (and the head of the Global Policy and Central Bank Strategy team), said in a research note that Powell “will use his speech Thursday to tee up a profoundly consequential and risk-friendly move to soft inflation averaging at the Fed’s upcoming September meeting,” and that he expects the Fed to “seek a moderate inflation overshoot during the recovery phase of this cycle” in order to avoid the kind of deflationary spiral that Japan fell into (after the Bank of Japan raised the interest rate in order to fight inflation).
Earlier today, Anthony Pompliano (aka “Pomp”), Co-Founder and Partner at crypto-focused asset management firm Morgan Creek Digital, said in his daily newsletter (“The Pomp Letter”):
“Our economy, and the central bankers overseeing it, need to become a little more pain tolerant. Just as Paul Volcker was willing to sustain the short-term pain of two economic recessions in pursuit of a strong economic foundation, we should be willing to withstand the current environment without succumbing to the urge of intervention.”
If Fed Chair Powell says on Thursday that the U.S. economy is recovering much slower than the Fed would like and that there is no reason to be overly worried about the risk of higher inflation in the U.S., that could mean a greater likelihood of further quantitative easing (QE), which might lead a weaker U.S. dollar and higher prices for both gold and Bitcoin.
According to data by CryptoCompare, Bitcoin is currently trading around $11,315, down 3.65% in the past 24-hour period.