Fed Rate Hike Expectations Soar as Bitcoin Surges Ahead of CLARITY Act Vote

The Federal Reserve's new chair, Kevin Warsh, has set market expectations high for a rate hike in September. In his speech at the Jackson Hole symposium, he stated that the Fed 'have work to do' to contain inflation, which has remained above the 2% target for more than five years.

Warsh noted that 54% of the personal consumption expenditures price index basket showed price increases above 3% over the past 12 months. He also reiterated his commitment to reducing 'forward guidance' through Fed statements and press conferences, instead relying on market signals from treasury yields, credit conditions, and dollar valuations.

With elevated inflation readings and a resilient labour market, expectations of a rate hike in September have risen to over 60%. The next inflation report is due on 11 September, which will be closely watched ahead of the Fed's meeting on 15-16 September.

In contrast to the Fed's hawkish stance, Bitcoin has been staging a strong comeback. It rose more than 24% in August to record its best monthly performance in nearly two years, with prices reaching around $78,000 at the end of the month.