CME's FedWatch tool now puts the odds of a Federal Reserve rate hike at 66.4%, up sharply after Fed Chair Kevin Warsh's Jackson Hole speech. President Donald Trump is still pushing for lower borrowing costs, but Wall Street, gold and bitcoin all fell on Tuesday as traders priced in the shift.
Trump Pushes for Cheaper Money as Warsh Weighs a Hike
Trump was asked in the Oval Office on Monday whether he opposed Warsh considering a rate increase. He said he had not spoken with the Fed chair about it and would not try to talk him out of one, adding that he respects Warsh and expects him to do what he has to do. Trump then said the United States should have the lowest interest rates in the world and that the central bank should cut borrowing costs while the economy is doing well.
The message tracks what Trump said in mid-August, when he described the federal funds rate as too high and argued the Fed should cut as soon as possible.
Warsh Holds the Line, Jackson Hole Speech Shifts the Odds
Warsh and the board left the rate unchanged at the newly appointed chair's FOMC meetings in June and July, though three board members wanted a quarter-point hike. He has also removed forward guidance from the Fed's playbook, telling markets to read the economy instead of waiting on the central bank's monthly signals.
The market already saw Warsh as hawkish before he took the job, and his first Jackson Hole speech reinforced that view. He said inflation prints have come in higher than the Fed wants, while noting they do not tell him that underlying trends have meaningfully improved. According to Bitcoin News, Warsh said: "the Fed's predominant focus right now should be on prices." Markets dipped within an hour of the speech, and CME's FedWatch tool began signaling a possible hike.
Odds Climb to 66% as Cramer Flags Trouble Ahead
The chances of a hike rose to 57% earlier in the week. By Tuesday, Sept. 1, they stood at a 66.4% chance of a quarter-point increase, with prediction markets showing the same sentiment.
CNBC's Jim Cramer said on X that he does not see how rates can fall with Warsh as Fed chair, pointing to the ongoing war, allied dependence on the U.S. and rising oil stocks as troubling signs.
Wall Street, Gold and Bitcoin Retreat
Wall Street opened lower on Tuesday, with the Dow Jones Industrial Average dropping 374.09 points. The Nasdaq Composite lost 31.54 points. The S&P 500 slid roughly 25.62 points.
Gold also lost ground, down 2.44% over 24 hours to $4,339 per ounce. Bitcoin fell nearly a percentage point to $77,778 as Wall Street's session opened.
Source: Bitcoin News
Trading involves risk.
Risk Disclaimer
