BTC, MACRO & OTHER BAD NEWS - UPDATE 01/2
Kevin Warsh sang the ball: the Fed wants to regain flexibility in monetary policy.
Warsh criticized excessive forward guidance. When the Fed spends too much time telling the market what it intends to do, it creates the mirror-hall problem—the Fed reacts to the market while the market reacts to the Fed.
The idea is fewer promises about the future and more reaction to data. And the data still isn’t exactly comforting.
The U.S. economy remains resilient; the labor market is close to full employment, and investments are still strong. At the same time, PCE is at 3.7%, well above the 2% target.
Warsh made it clear that price stability remains the Fed’s central responsibility and that interest rates should remain the main tool of monetary policy.
AI is also on the radar.
The Fed has already created a task force to assess how productivity gains driven by artificial intelligence could change growth, employment, and, consequently, the very conduct of monetary policy.
OK, BUT SO WHAT?
The market may continue to expect rate cuts, but Warsh’s message puts a brake on that certainty.
If inflation continues to run above target and the economy continues to be relatively strong, there is less room for the Fed to simply deliver the cuts the market would like to price in.
And for Bitcoin, the liquidity environment depends not only on how much the Fed cuts, but also on why it is cutting. If it cuts because of economic slowdown is the story, with inflation still pressing, the problem is the o-to-dô.
And the Fed seems increasingly interested in making it clear that it doesn’t want to be a hostage to the market’s expectations.
Less forward guidance. More data. More uncertainty.
Welcome to Uncle Jackson’s Pit.
Kevin Warsh sang the ball: the Fed wants to regain flexibility in monetary policy.
Warsh criticized excessive forward guidance. When the Fed spends too much time telling the market what it intends to do, it creates the mirror-hall problem—the Fed reacts to the market while the market reacts to the Fed.
The idea is fewer promises about the future and more reaction to data. And the data still isn’t exactly comforting.
The U.S. economy remains resilient; the labor market is close to full employment, and investments are still strong. At the same time, PCE is at 3.7%, well above the 2% target.
Warsh made it clear that price stability remains the Fed’s central responsibility and that interest rates should remain the main tool of monetary policy.
AI is also on the radar.
The Fed has already created a task force to assess how productivity gains driven by artificial intelligence could change growth, employment, and, consequently, the very conduct of monetary policy.
OK, BUT SO WHAT?
The market may continue to expect rate cuts, but Warsh’s message puts a brake on that certainty.
If inflation continues to run above target and the economy continues to be relatively strong, there is less room for the Fed to simply deliver the cuts the market would like to price in.
And for Bitcoin, the liquidity environment depends not only on how much the Fed cuts, but also on why it is cutting. If it cuts because of economic slowdown is the story, with inflation still pressing, the problem is the o-to-dô.
And the Fed seems increasingly interested in making it clear that it doesn’t want to be a hostage to the market’s expectations.
Less forward guidance. More data. More uncertainty.
Welcome to Uncle Jackson’s Pit.
