The Real Intent Behind Powell's Hawkish Tone
Federal Reserve Chair Powell's recent public remarks appear hawkish at first glance, but a deeper analysis of the underlying narrative strategy reveals a deliberate effort to pave the way for a September rate cut. This 'overt action concealing covert intent' approach mirrors historical Fed communication patterns before major policy shifts. By emphasizing lingering inflation pressures and the need for restrictive rates, Powell reassures markets about inflation risks while quietly recalibrating the policy framework's reference benchmarks.
Suppressing Long-End Rates and Reconstructing Inflation Metrics
The two core pillars of Powell's strategy are: first, guiding market expectations to suppress long-term Treasury yields (long-end rates), creating looser financial conditions for rate cuts; second, redefining inflation metrics—moving away from the traditional PCE (Personal Consumption Expenditures price index) toward alternative indicators such as NTRR (National True Return Rate) and Truflation. These new metrics typically show inflation has fallen significantly, providing data support for rate cuts.
Redefining the Neutral Rate and Deconstructing AI Inflation Logic
Furthermore, Powell is attempting to redefine the 'neutral rate' (the rate that neither stimulates nor restrains the economy), lowering its estimated value so that current real rates appear higher, thus offering justification for cuts. He also deconstructs the narrative that 'AI drives inflation,' arguing that the penetration of new technologies like AI actually has deflationary effects (cost reduction, efficiency gains), further weakening the case for maintaining high rates.
Implications for the Crypto Market
If September brings a rate cut as expected, US dollar liquidity will improve marginally, potentially triggering a short-term rally in risk assets like Bitcoin. However, markets should be wary of volatility caused by 'hawkish expectation management' before the cut, and the 'buy the rumor, sell the fact' adjustment after the cut. Crypto investors should monitor subsequent Fed officials' speeches, inflation metric changes, and the midterm election political calendar.
Source: MarsBit