The statement made by Federal Reserve Chairman Kevin Walsh at Jackson Hall rekindled the market ' s expectations of further interest rates. As a result, Bitcoin fell $80,000 after his speech, and the traders synchronized up their bets on the 2026 interest rate hike.
Walsh stressed that inflation was not on target.
Walsh put inflation at the heart of his speech. He indicated that the Federal Reserve had insisted on a 2 per cent PCE inflation target, which was currently 3.7 per cent for 12 months and 4.1 per cent for 6 months, indicating that price pressures had not returned to the policy target.
He stated that, while the PCE and CPI data published this summer were better than expected, they were not sufficient to demonstrate that there had been a marked improvement in potential inflation trends. Of the 199 categories of goods and services in the PCE basket, 54 per cent of the projects in the past 12 months increased by more than 3 per cent, still significantly above the long-term average before the outbreak.
Walsh stated that if inflation did not return to 2 per cent at a sufficiently clear and fast rate, the Fed would still need to move further. Although he had not made a direct commitment to the next meeting to increase interest rates, the market generally interpreted that statement as a hawk signal.
The market's got a raise.
The Nansen research analyst, Jake Kennis, said that the Walsh language meant that if inflation continued to remain high, further interest rates would remain optional. Polymarket data show that the market's probabilities of at least one increase in interest in 2026 have risen to 68 per cent, up from less than 50 per cent a week ago.
While highlighting the risk of inflation, Walsh described the United States economy relatively positively. He indicated that investment in equipment and intangibles had grown by about 9 per cent over the past four quarters, the fastest since 2021, with more than half of the increase in capital spending this year related to AI infrastructure. The unemployment rate in the United States currently stands at 4.1 per cent, leaving room for policy operations.
Citing forecast market data, the report states that the probability of an increase of 25 basis points in September is about 50 per cent, while the probability of maintaining the same is around 51 per cent. Because of real-time changes in transactions and rounding, the two data overlaps. The August CPI and PPI, published before the meeting, will be an important observation point for the next phase.
Bitcoin's fallback-plus option due
After the speech, Bitcoin fell back from a position above $80,000 in the day to approximately $792 million, with a drop of nearly 2 per cent in the day. This drop interrupted the previous rebound. On 25 August, Bitcoin had been back on its feet for nearly 15 weeks, with a cumulative increase of about 28 per cent over the past eight days.
The previous week, United States spot bitcoin ETF had attracted about $19.2 billion in net inflows, driving market testing of $88,000 to $82,000 in inter-zone resistance. However, the Nansen analyst, Lai Sondergaard, who issued N tokens, pointed out before his speech that the short-line structure was not stable, inter alia, because of congested multi-fund rates, the contraction of unsettled contracts, the fall in the volume of ETF transactions, and the mixed flow of exchange funds.
Shortly before Walsh's speech, Deribit had just completed, on August 28th, at 08:00 UTC, a shipment of bitcoin options of about $6.4 billion, which involved about 817 million contracts. Bitget Wallet, a research analyst, Lacie Zhang, said that the warehouse was more or less constructive in its entirety, but that the nominal size itself could not be considered a direct one-way bet, because a significant part of it came from a market-based hedge and price differential strategy.