Warsh’s Jackson Hole speech puts rate hike on the table

Federal Reserve Chair Kevin Warsh has put another interest-rate increase on the table after saying inflation remains well above the Fed’s 2% target, sending Bitcoin below $80,000 as traders raised their rate-hike bets.

Warsh says inflation must return to 2% faster

The Federal Reserve’s published remarks show that Warsh made price stability the central focus of his first Jackson Hole keynote as chair, describing the 2% PCE inflation goal as a “firm, fixed target.”

Warsh said the Fed’s preferred measure, the 12-month change in the Personal Consumption Expenditures price index, stands at 3.7%. The six-month change has reached 4.1%, while comparable headline and core Consumer Price Index readings also remain elevated.

“So the Fed’s predominant focus right now should be on prices,” Warsh said.

Although the summer PCE and CPI reports came in better than expected, Warsh said the releases did not show that underlying inflation trends had “meaningfully improved.” Progress from the inflation highs reached in 2022 has also been modest during the past two years, he added.

Looking beneath the headline figures, Warsh said 54% of the 199 goods and services in the PCE basket recorded price increases above 3% during the past 12 months. The share was lower than the post-pandemic peak of about 77% but remained far above the 32% average recorded during the two decades before the pandemic.

Over the past six months, 49% of the basket posted annualized price increases above 3%, according to the Fed chair. Commodity prices have also risen recently, leaving policymakers to assess whether the move could add to inflation risks.

“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” Warsh said.

Warsh did not commit to a specific interest-rate decision, saying he was committed to a policy discipline rather than a predetermined outcome. However, Jake Kennis, senior research analyst at Nansen, told crypto.news that the wording left additional increases available if inflation remains elevated.

Kennis described the speech as clearly hawkish, pointing to Warsh’s statement that he would be “hard pressed to describe broad financial conditions as restrictive.”

“He added the Fed has ‘work to do’ unless inflation moves to 2% ‘clearly and at sufficient speed,’ which is a signal that rate hikes are on the table if elevated inflation persists.”

Strong US economy gives the Fed room to act

Warsh’s inflation warning came alongside an upbeat assessment of the American economy, which the Fed chair said appeared to have strengthened despite pressure in housing and agriculture.

Business investment in equipment and intangible assets has grown by about 9% over four quarters, its fastest pace since 2021, according to the speech. Warsh attributed more than half of this year’s capital-expenditure growth to the artificial intelligence buildout.

S&P 500 company profits have climbed by more than 20% during the past year, while corporate bond and leveraged-loan spreads remain near the lower end of their historical ranges. Strong issuance and comparatively easy bank-lending standards led Warsh to say that credit markets show few signs of policy restraint.

Labor conditions have also remained stable. The unemployment rate stands at 4.1%, while the four-week average of jobless claims remains close to its lowest level in decades, according to Warsh.

At the July meeting, most Federal Open Market Committee members voted to wait for more information before changing rates, even as policymakers agreed that inflation remained too high. Warsh said the committee also expressed a shared readiness to respond if conditions required action.

For American investors, the Fed’s next decision could affect Treasury yields, the dollar and prices across risk assets, including US-listed spot Bitcoin exchange-traded funds. Polymarket contracts cited in the supplied report placed the probability of at least one rate increase during 2026 at 68%, up from less than 50% a week earlier.

The prediction market placed the chance of a 25-basis-point increase at the September meeting at about 50%, while the probability of no change stood near 51%, with rounding and changing trades allowing the displayed figures to overlap. August CPI and PPI reports due before the meeting will give policymakers more data on whether price pressure is easing.

Bitcoin falls below $80,000 after Warsh’s speech

Following the keynote, Bitcoin fell from an intraday level above $80,000 to about $79,200, leaving the asset down nearly 2% on the day.

The decline interrupted a rally that had carried Bitcoin above $80,000 on Aug. 25 for the first time in almost 15 weeks. As previously reported, BTC had gained about 28% in eight days and tested resistance between $80,000 and $82,000 after US spot ETFs attracted approximately $1.92 billion in weekly inflows.

Before the speech, Nicolai Sondergaard, senior research analyst at Nansen, said Bitcoin’s higher-timeframe trend remained bullish, but several shorter-term measures had become less convincing. He cited crowded long funding, contracting open interest, fading ETF trading volume, and mixed exchange flows.

Sondergaard said the importance of the address would come from its effect on interest rates, the dollar and the Fed’s response to new economic data, rather than a simple hawkish-versus-dovish label.

“A hawkish signal is more dangerous because it hits crowded longs. For upside to stick, we need lower yields, stable dollar liquidity, improving CVD and BTC holding above roughly $80.4k with OI expanding.”

Without those conditions, Sondergaard described the setup before the keynote as a “fragile bullish structure, not a high-conviction breakout.”

Positioning had already become vulnerable before Jackson Hole. Bitcoin previously fell 4.1% from $81,238 to $77,870, while long liquidations reached about $270 million across the crypto market. Bitcoin futures open interest dropped roughly 4.5% from the level recorded around the $81,238 peak.

Bitcoin options expiry clears $6.4 billion overhang

Warsh delivered his speech after approximately $6.4 billion in Bitcoin options expired on Deribit at 08:00 UTC on Aug. 28, clearing a large block of contracts shortly before the market reacted to his comments.

The options expiry included roughly 81,700 contracts, comprising 44,639 calls and 37,061 puts. Calls outnumbered puts at a ratio of 0.83, with the largest concentrations sitting around the $75,000 and $80,000 call strikes.

Lacie Zhang, research analyst at Bitget Wallet, said the positioning showed constructive rather than euphoric confidence. Calls trading at higher premiums than comparable puts suggested that traders were paying for exposure to further gains after Bitcoin’s rally instead of heavily buying downside protection, she added.

“The $6.4 billion notional should not be read as a directional bet, since much of it reflects hedged dealer books and spread positions.”

According to Zhang, strike concentrations mattered more for price pinning and dealer hedging before settlement. With the contracts now expired, she said traders should watch whether open interest returns at higher strike prices and whether call premiums remain elevated across September and December maturities.

“If it does, that would confirm more durable bullish conviction; if skew normalizes quickly, the move was mainly expiry-specific positioning,” Zhang said.