Bitcoin Retraces Following Warsh’s Inflation Message: 42 Percent Probability of a September Rate Hike

While Kevin Warsh’s inflation message pushed Bitcoin to $78,700, the expectation for a rate hike in September rose to 42 percent.

Fed Chair Kevin Warsh, in his speech at the Jackson Hole meeting, stated that the central bank must focus on inflation right now. The remarks reported by CoinDesk led markets to pull back rate cut expectations and increased selling pressure on risky assets.

Warsh noted the need to ensure inflation is moving toward the target quickly enough. “Otherwise, we have work to do. This is our job, our mandate, and the responsibility we must fulfill,” he said. The Fed Chair also stated that responsibility for 65 months of high inflation rests directly with the central bank.

Bitcoin Declines, Rate Hike Expectations Rise

Following the speech, the Bitcoin price retraced to $78,700. While a limited decline was seen in U.S. stock markets, bond yields rose slightly. This movement showed that investors are repricing the possibility of higher-for-longer interest rates.

According to CME FedWatch data, the probability of a September rate hike rose to 42 percent from 35 percent the previous day. FedWatch reflects market interest rate expectations by monitoring futures pricing. However, this shift does not mean the Fed has made a new interest rate decision.

Warsh’s statements also diverged from Treasury Secretary Scott Bessent’s approach suggesting potential intervention in the bond market to limit long-term interest rates. While Bessent argues that long-term bond yields could remain higher than they should be due to issues in market mechanisms, Warsh supports the idea that rates should be determined by the market.