The head of the Federal Reserve warned that people and businesses should brace themselves for hardship as the central bank attempts to reduce inflation.
In the two hours following Federal Reserve Chair Jerome Powell’s eagerly awaited keynote speech at the Fed’s Jackson Hole, Wyoming, an economic conference on Friday morning, the price of Bitcoin (BTC) fell by about 5%. Along with cryptocurrency, equity markets fell, with the S&P 500 index falling by more than 2%.
Bob Iaccino, chief strategist at Path Trading Partners and co-portfolio manager at Stock Think Tank, told CoinDesk that the stock market had not priced this in until only a few days ago since the risk, not the assumption, was that they would be hawkish.
He continued, “[The market] is pricing it is now at least as much as it believes the Fed, but at this point, it’s about Powell’s reputation and his credibility. Iaccino added that markets had risen before the speech, possibly in anticipation of more dovish comments, thus worsening the loss today.
Powell stated in his speech that “reducing inflation is likely to require a protracted period of below-trend growth… Inflation will be reduced by higher interest rates, slower GDP, and a tougher labor market, but this will hurt both families and companies.
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Bitcoin, the biggest cryptocurrency by market value, didn’t immediately respond much to Powell’s comments, but it has since gone drastically downward, dropping from just under $22,000 prior to the speech to the current $20,700.
The Dow Jones Industrial Average is down 1.8%, the Nasdaq is down 2.7%, and the S&P 500 is down 2.15%.