Jerome Powell, the head of the Federal Reserve, recently spoke at an annual economic conference in Jackson Hole, Wyoming. He talked about some potential challenges that people who borrow money might face. Powell mentioned that the Fed is thinking about raising interest rates more, and these rates might stay higher for a longer time than people expected. He said that the Fed’s choice would depend on how the economy grows and how the job market is doing.
Powell also talked about worries related to inflation, which is when prices of things keep going up. He said that even though inflation had gone down a bit from its highest point, it was still quite high. Powell explained that the Fed is ready to raise interest rates more if needed. They want to have strict rules about borrowing until they’re sure that inflation is going down.
Although Powell didn’t directly say that the Fed would definitely raise rates more, he gave a fair look at how inflation has been behaving lately and the risks it might cause for the Fed’s goals. This made the financial markets, where people trade things like stocks, bonds, and cryptocurrencies, feel uncertain. The prices of stocks in the US went up and down.
Back in July, the Fed had already raised a key interest rate a bit, which made it the highest in 22 years. This was because they were worried that the economy was doing really well, which could make prices rise too much. Some people at the Fed thought it’s a good idea to raise rates more, while others were concerned that it might hurt the economy.
When Powell talked about his speech, he said that inflation was getting a bit better, according to a number the Fed uses to measure it. But he still wants inflation to be around 2%, and he’s not changing that goal for now. Some experts have suggested different goals, but Powell is sticking to the one they have.
Powell also talked about something called the “neutral rate of interest.” He said that having higher interest rates might be slowing down how much the economy grows, but he’s not completely sure how much they should slow it down. He hinted that they might raise rates more, but he also said that there’s a lot of uncertainty about what the Fed will do next.
After Powell’s speech, the price of Bitcoin, a type of digital money, went down a bit and then went below $26,000 for a short time. This happened because investors got worried that the Fed might keep trying to stop inflation and raise rates even more. Other digital currencies also had small losses, similar to what happened with Bitcoin. The prices of bonds (which are like loans that people can buy and sell) and stocks went down at first, but then they went back up. People started to think that the Fed might raise rates more in the next few months.
All in all, Powell’s talk showed that the Fed is being careful about dealing with inflation, and it’s not easy to know what they’ll decide to do next. This uncertainty affected many parts of the financial markets, including digital currencies like Bitcoin.