Fed Policy Shift After Jackson Hole Spurs Crypto Rally, Says UBS
UBS analysts interpret Fed Chair Jerome Powell’s Jackson Hole speech as a clear policy shift. Powell emphasized labor market risks alongside inflation, marking a dovish turn. He noted that policy is “in restrictive territory” and flagged potential adjustments if employment or inflation outlooks change. Markets reacted by boosting crypto prices, as investors now price in possible rate cuts. UBS highlights three key points: a new focus on employment risks, the specter of rapid job losses, and close monitoring of inflation expectations. Traders should watch incoming jobs and inflation data. A pivot toward looser monetary policy could sustain crypto gains in both the short and long term.
Bullish
Powell’s speech signals a dovish pivot by adding employment risk to the Fed’s policy framework. Mention of restrictive policy with potential adjustments has strengthened market bets on future rate cuts. Historically, Fed easing and rate-cut expectations boost liquidity and risk asset demand, including cryptocurrencies. For example, after the 2020 Powell-driven easing cycle, Bitcoin and altcoins rallied as yields fell. In the short term, traders may buy on dips ahead of key jobs and inflation releases. Over the long term, a continued shift toward lower rates can sustain a bullish environment for crypto by reducing opportunity costs and increasing speculative inflows.