Fed Abandons Flexible Inflation Targeting Framework
- The Federal Reserve ends 2020 inflation policy at Jackson Hole.
- Market reactions include stock rallies; potential for crypto volatility.
- Adaptive monetary strategy indicates tighter interest rate management.
On August 22, 2025, Federal Reserve Chair Jerome Powell announced at the Jackson Hole symposium a pivot away from the 2020 flexible average inflation targeting framework.
This shift signals potential changes in US monetary policy affecting various markets, including cryptocurrency volatility and investor strategies.
The Federal Reserve announced the abandonment of its 2020 flexible average inflation targeting framework on August 22, 2025. This shift indicates a significant change in policy approach aimed at managing inflation differently. Jerome Powell revealed this at the Jackson Hole symposium.
Chair Jerome H. Powell stated the U.S. economy’s resilience amidst policy changes. The Federal Reserve Board’s decision signals a return to pre-2020 policies to mediate economic stability. Powell highlighted strategies in a speech, emphasizing policy review developments.
“Over the course of this year, the U.S. economy has shown resilience in a context of sweeping changes in economic policy…. I will then turn to the results of our second public review of our monetary policy framework, as captured in the revised Statement on Longer-Run Goals and Monetary Policy Strategy that we released today.” – Jerome H. Powell, Chair, Federal Reserve, Federal Reserve Speech
The stock market experienced rallies in major indices post-announcement, reflecting investor optimism. Historically, such shifts have impacted the crypto market with increased volatility in Bitcoin and Ethereum, aligning with rate adjustments and market expectations.
This policy shift affects financial markets and could influence crypto asset allocations. Experts view this as a return to tighter interest rate management, impacting BTC, ETH, and DeFi. Stablecoins may see liquidity adjustments as interest rates fluctuate.
Past Fed policy changes have included pivots in 2018 and 2020, affecting market dynamics. BTC and ETH responded notably to these historical shifts with volatility. This change could set the stage for further cryptocurrency interest rate sensitivity.
Potential outcomes include increased market volatility and shifts in investor strategies towards cryptocurrencies. Historical data suggests market adjustments could follow, in line with past Federal Reserve policy modifications. Powell’s remarks hint at continued vigilance in economic strategy.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Powell takes on big test to cut rates without losing Fed independence
Share link:In this post: Powell may cut interest rates in September because the economy is slowing, but he’s being cautious to avoid looking like he’s giving in to Trump. Trump wants big rate cuts to help with government debt, but Fed officials, like Beth Hammack, say inflation is still too high. Trump is pressuring Fed leadership, threatening to fire Lisa Cook and nominating Stephen Miran to the Fed board after a recent vacancy.
SpaceX to launch Starship despite back-to-back losses
Share link:In this post: SpaceX is preparing to launch Starship from South Texas on August 24 after recent failures in flight and ground tests. NASA is relying on Starship for its Artemis moon program with a $4 billion contract and a 2027 deadline. The rocket stands nearly 400 feet tall with 33 booster engines and will attempt controlled splashdowns in the Gulf of Mexico and Indian Ocean.
US debt could hit 250% of GDP without spiking rates, Fed paper says
Share link:In this post: A Fed paper says the US can hit 250% debt-to-GDP without spiking interest rates—if demand holds up. Interest payments already hit $1.2 trillion, and will hit $1.4 trillion in 2026 unless yields fall. The Fed plans to cut rates soon, blaming rising unemployment despite inflation still climbing.
BLS credibility hit pushes Wall Street deeper into private data
Share link:In this post: Trump fired BLS head Erika McEntarfer and claimed July’s jobs report was rigged without proof. Wall Street investors are shifting away from BLS data and relying more on private sources. Experts like Philip Petursson and Michael O’Rourke no longer trust BLS numbers fully.
Trending news
MoreCrypto prices
More
