Crypto Rallies as Powell Signals Rate Cuts Ahead

Federal Reserve Chair Jerome Powell used his Jackson Hole address on Friday to hint strongly that interest rate cuts could begin as early as September, pointing to mounting vulnerabilities in the U.S. labor market.

What’s the Scoop?

• Labor Market Strain: Powell highlighted slowing job growth and warned that President Trump’s immigration crackdown may be distorting labor supply, creating “downside risks” that could quickly turn into layoffs and higher unemployment.
• Inflation Pressures: While inflation remains above target, Powell downplayed concerns that Trump’s tariffs would drive a long-lasting price surge, calling them a “one-time shift” in costs.
• Policy Shift: Powell said “the balance of risks appears to be shifting,” signaling the Fed is preparing to ease borrowing costs after holding steady for much of 2025.
• Market Reaction: Crypto rallied on the comments, with ETH up 9.5%, SOL up 6.5%, and BTC up 3.5%.

Bankless Take:

The labor market is the backbone of the U.S. economy. Although mainstream believes that interest rate cuts will better labor conditions, there is a certain irony in markets pumping on news that the economy is weakening.