The new Federal Reserve Chairman, Kevin Walsh, will deliver his first major international address at the annual ECB policy forum in Sintra, Portugal, on 1 July. The market concern is not whether he will directly imply a reduction in interest rates, but whether he will change the way the Fed communicates in recent years.

The market is not expected to give interest rate paths.

Many agencies expected that, this time, Walsh would not send clear interest-rate signals to the market in advance, as had been the case with some former presidents, but would focus back on economic data itself. Along these lines, investors need to pay more attention to subsequent inflation, employment and growth data than to finding policy direction from official language.

It was mentioned that Walsh had previously indicated that federal interest rates would not be adjusted immediately in the short term. Beyond this, however, it may be difficult for the market to obtain more specific policy hints from this speech.

  • The probability of a monthly interest rate constant is 66.3 per cent
  • At least an increase in September 25 basis points is estimated at 66.9 per cent.

Inflation remains at the heart of the speech

The market generally predicted that Walsh would continue to focus on inflation. Although inflation in the United States has fallen higher, it is still close to 3.6 per cent, significantly above the long-term Fed target of 2 per cent.

Against this background, he may continue to emphasize price stabilization priorities, even if this means that interest rates need to be maintained at higher levels for longer. It was also reported that Walsh was looking at a number of Federal Reserve policy frameworks, including how to communicate with markets, inflation targeting and the data systems on which policy decisions would be based.

Encryption Market Sync Pressure

The statement was followed up and related to current risk asset exposure. According to reports, the total market value of the encryption market has recently evaporated to nearly $60 billion, down to about $2.04 trillion.

Bitcoin has fallen by $59,000, and the real bitcoin ETF in the United States continues to see larger outflows. Of this, 30 June net outwards on a single day amounted to $222 million. At the same time, leverage has grown, with more than $136 million in more recently liquidated bitcoin.

If Walsh continues its “less-guided, heavy-data” mode of communication, the short-term market bets on the Fed's path may be more dependent on subsequent economic data release, which may also continue to magnify the volatility of risk assets, including encrypted assets.