Just when we think we have all the answers, Jerome Powell changes the questions.
The chair of the United States Federal Reserve Board gave a speech Friday morning at an economic symposium in Jackson Hole, Wyoming, where, according to the transcript posted on the Fed’s website, Powell said the U.S. economy was showing “resilience” in the face of “sweeping changes” in Washington.
It didn’t take long for crypto betting and investing analysts to process Powell’s speech.
The message was clear: interest rates might be coming down after all. And just like that, the price of Bitcoin (BTC) shot up from around US$112,000 to $116,913.92 as we go to press.
This is welcome news for everyone who bet the Over for the end-of-year price of Bitcoin on the financial odds board at BetOnline (visit our BetOnline Review). That total has crept up over the past several months, hitting $122,000.50 at press time as BTC continues to set new records. But is this real life? Is Powell actually going to push that shiny red button and drop that key benchmark interest rate? The answer may surprise you.
Will Powell Lower Interest Rates in September?
Probably. That’s how the traders at Polymarket see things; there’s a special “Fed decision in September” contract on their prediction market with the following four outcomes available for purchase:
- 50+ bps decrease 3.1%
- 25 bps decrease 79%
- No change 18%
- 25+ bps increase 0.3%
These numbers are actually pretty close to where things stood about two weeks ago, before President Trump threatened to sue Powell over the cost of renovations at the Fed’s headquarters in D.C. – ostensibly to pressure Powell into lowering those interest rates.
It didn’t work. Powell held firm, and Polymarket saw “No change” move all the way up to 39% Friday morning. But then, just like that, the bottom fell out of the market when Powell’s speech was posted on the interwebs.
Why Has Powell Changed His Tune?
He hasn’t. At least not that much.
In his transcribed speech, Powell talks about the “significant uncertainty” the Trump Administration is unleashing on the U.S. economy through tariffs, immigration policy, and changes to the tax code. He also maintains that 2% is the “most consistent” longer-run inflation rate for keeping the labour market strong. Said rate remained at 2.7% for July, albeit lower than the estimated 2.8% in that month’s forecast.
Still, Powell’s speech appears to signal that the Fed is willing to look beyond that 2% benchmark when the next Federal Open Market Committee (FOMC) convenes September 16-17. The motivation, aside from White House pressure, is the shrinking U.S. labor force, which faces the double whammy of immigration cuts and tariff-induced hiring freezes.
Why Are Lower Interest Rates Good for Bitcoin?
Because they spur riskier investments. When the benchmark lending rate is high, people have more motivation to invest in bonds and Treasury bills – even vanilla savings accounts. When the lending rate is low, investors have to look elsewhere for growth, and speculate in more volatile assets like crypto.
There are other driving forces at work here. Rate cuts mean cheaper borrowing costs and more liquidity; that money has to go somewhere. And with the Trump Administration’s focus on lowering the value of the U.S. dollar, through punitive global tariffs as well as smaller interest rates, crypto once again starts to look like a plausible hedge against inflation.
None of this means it’s a deadbolt lock. Powell will announce that rate cut in September – or that the price of Bitcoin will keep rising in response. Other events could cause some kind of larger crisis in the markets. But if you’re looking at those Bitcoin odds at BetOnline, the needle is still pointing towards Over for now.
Bet and invest accordingly.
