- Fed Chair Kevin Warsh formally declared forward guidance has “overstayed its welcome” during his Jackson Hole keynote on his 100th day in office.
- Bitcoin traded flat near $80,000 as Warsh refused to signal the Fed’s next rate move, citing a “hall-of-mirrors problem.”
- Warsh footnoted his 2022 essay on cryptocurrency, signaling the Fed’s increased focus on the concept of “money” in the digital age.
- The Fed’s preferred inflation gauge sits at 3.7%, nearly double its 2% target, with Warsh noting the central bank still has “work to do.”
Kevin Warsh marked his 100th day as Federal Reserve chair on Friday by delivering a Jackson Hole keynote that formally declared forward guidance has “overstayed its welcome.” However, the crypto market reacted with indifference, leaving Bitcoin flat near $80,000 after a week-long rally. Warsh argued that the Fed’s practice of hinting at future rate moves creates a “hall-of-mirrors problem,” distorting economic reality. “Market participants will always try to anticipate what we will do next,” he said. “But we should not indulge a regime in which market participants are looking primarily to the Fed for their next trade.” Buried in the footnotes, Warsh cited his own 2022 essay on cryptocurrency, arguing that “money” deserves closer Fed attention. The Fed’s preferred inflation gauge, the PCE price index, is running at 3.7% annually, nearly double its 2% target. Warsh said 54% of the goods and services the Fed tracks have posted price gains above 3% over the past year. He gave no timeline for when that changes, keeping traders guessing at exactly the moment Bitcoin needed clarity to extend its rally past $80,000. Consequently, traders briefly sold off Bitcoin by roughly $1,000 during the speech before the price recovered. CME FedWatch data shows traders have cut the odds of a September hike to 38.4% from 82% a month earlier.
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