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.
Key Takeaways
Warsh said 12-month PCE inflation stands at 3.7%, while the six-month rate has reached 4.1%
Bitcoin fell nearly 2% to about $79,200 after trading above $80,000 earlier in the day
Polymarket traders raised the probability of a 2026 rate hike to 68% after the speech
Nansen analysts said a hawkish message could pressure crowded Bitcoin longs after a $6.4B options expiry
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 PCE price index, stands at 3.7%. The six-month change has reached 4.1%, while comparable headline and core CPI readings also remain elevated.
So the Fed's predominant focus right now should be on prices.
— Fed Chair Kevin Warsh
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. 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. This connects to the broader macro environment covered in Bitcoin's bull case amid U.S. debt and Truflation's PCE forecast.
Strong US Economy Gives the Fed Room to Act
Warsh's inflation warning came alongside an upbeat assessment of the American economy. Business investment in equipment and intangible assets has grown by about 9% over four quarters, its fastest pace since 2021. 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. The unemployment rate stands at 4.1%. Polymarket contracts placed the probability of at least one rate increase during 2026 at 68%, up from less than 50% a week earlier. This connects to the NVIDIA's AI-driven revenue growth.
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. Before the speech, Nansen senior research analyst Nicolai Sondergaard said Bitcoin's higher-timeframe trend remained bullish, but several shorter-term measures had become less convincing. A hawkish signal is more dangerous because it hits crowded longs, Sondergaard said. For upside to stick, Bitcoin needs lower yields, stable dollar liquidity, and holding above roughly $80,400 with open interest expanding.
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. The clearing of this options overhang connects to the $6.4B options expiry preview covered earlier.
