Crypto market in agony after Powell said the Fed must use its tools “vigorously” to bring down inflation

Earlier today (August 26), Federal Reserve Chairman Jerome Powell delivered an important speech at the 2022 Economic Policy Symposium, which will be held (August 25-27) in Jackson Hole, Wyoming and hosted by the Federal Reserve Bank of Kansas City.

In a speech entitled “Monetary Policy and Price Stability”, Powell said:

“The Federal Open Market Committee’s (FOMC) overarching focus right now is to bring inflation back to our 2 percent target. Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy. Without price stability, the economy doesn’t work for anyone…

“Restoring price stability will take some time and requires vigorous use of our tools to bring demand and supply into better balance. Reducing inflation is likely to require a prolonged period of below-trend growth. In addition, there will very likely be some softening of labor market conditions. While higher interest rates, lower growth and softer labor market conditions will bring down inflation, they will also cause some pain for households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability will mean far greater pain.

“July’s increase in the target range was the second increase of 75 basis points in as many meetings, and I said then that another unusually large increase might be appropriate at our next meeting. We are now about halfway through the intersessional period. Our decision at the September meeting will depend on the totality of the incoming data and the development outlook. At some point, as monetary policy tightens further, it will likely be appropriate to slow down the increase.“

Powell’s hawkish tone shows that traders were right to be concerned about today’s speech. Currently (as of 15:43 UTC on August 26), US stocks are struggling today, with all four major US stock indexes in the red:

The crypto market is doing even worse today, with Bitcoin ($BTC) trading around $20,764 (-3.51%) and Ethereum ($ETH) trading around $1,590 (-6.04%).

Here’s what prominent macroeconomist and cryptoanalyst Alex Krüger had to say about Powell’s speech: