Walsh abandons forward-looking guidance, the probability of a rate hike in September soars 60%

According to Woofun AI, Federal Reserve Chairman Walsh delivered his first keynote speech in Jackson Hole since taking office, completely disrupting the market's existing policy path expectations and triggering a panicky repricing of the global risk asset system.

The structural deterioration of inflation data became the core basis for this policy shift. Of the 199 segments that make up the PCE Price Index, 54% of projects have increased by more than 3% in the past 12 months; even if the time window is reduced to the past six months, this ratio is still as high as 49% on an annualized basis. At the macro level, the overall PCE annualized inflation rate was 4.1% in the past six months and 3.7% in the past year, all significantly deviating from the Federal Reserve's 2% target. Walsh stressed that it is necessary to be convinced that potential inflation is moving clearly and quickly enough towards the target, otherwise the central bank still has work to do.

This statement led to a sharp repricing in the market, and the probability of interest rate hikes in September jumped from 35% to 60%. Data compiled by Woofun AI showed that two-year treasury bond yields climbed to a one-month high, the US dollar strengthened at the same time, and traditional safe-haven assets were under pressure at the same time.

A sharp fall in asset prices is intertwined with a fundamental shift in policy frameworks. Bitcoin just broke through the $80,000 mark the day before the speech, then took a sharp turn and dropped to around 76,000 at one point. The derivatives market liquidated $488 million of positions within 24 hours, with bulls losing more than $360 million. The gold and silver markets were also hit, and the precious metals sector evaporated more than $700 billion in market value after the speech. Previously, the core support for Bitcoin's rebound came from concentrated capital inflows from spot ETFs. Up until Walsh's speech last week, US spot Bitcoin ETFs had absorbed more than 1.1 billion US dollars in total, but Bitcoin ETFs had another outflow on the day of the speech. The more profound effect is that Walsh explicitly abandoned forward-looking guidance, saying that the tool had surpassed its popularity and instead promised adherence to discipline rather than specific decisions.

This means that the market can no longer take action cues from the Federal Reserve's rhetoric, and future fluctuation windows for highly liquidity-sensitive assets such as Bitcoin may be more frequent and unpredictable.

Hedging measures and subsequent key points will determine the direction of the market. The Ministry of Finance announced that from September 9, the maximum liquidity repurchases of 10-20- and 20-year nominal bonds will increase from $2 billion to at least $4 billion each. The aim is to improve long-term treasury bond trading conditions, but it is clearly defined as conventional debt management rather than quantitative easing. Next, market pricing will revolve around the mid-September FOMC meeting, after the August employment report, CPI data, and another vote on the Clarity Act to be announced. If inflation readings continue to be high, the pressure to raise interest rates will increase further; conversely, if data softens, ETF capital inflows may resume. Bitcoin's ability to withstand the new conflict depends on whether subsequent data can depress inflation indicators and whether ETF demand continues to flow in.