CEEX Observation: Full Text Breakdown of Powell's Speech - How Employment Risks Raise the Probability of Rate Cuts in September?

Every summer, the central bank annual meeting in Jackson Hole, Wyoming, serves as a barometer for global monetary policy. In 2025, the U.S. economy continues to navigate between high interest rates and tariff impacts. The Federal Reserve has implemented several rate cuts since the fall of 2024, but subsequently paused due to inflation and trade war concerns. On August 22, Fed Chair Jerome Powell delivered a speech at the annual meeting. He shifted from a previously cautious tone, emphasizing that the balance of risks is changing: while the upward price pressure from tariffs persists, the downside risks in the labor market are rapidly increasing. Following the speech, not only did U.S. Treasury yields decline sharply, but the stock and cryptocurrency markets also reacted, with traders anticipating a new round of rate cuts at the September meeting.
Analyzing Powell's speech and the subsequent market reactions reveals that labor market risks are the key variable driving the soaring probability of a rate cut in September. The CEEX Research Institute explores this from various aspects, including the speech content, the current state of the labor market, tariffs and inflation, policy framework adjustments, market reactions, cryptocurrency impacts, and industry perspectives.

Core of the Speech: Risk Balance Shifts Toward Employment

Powell pointed out in his speech: "In recent expectations, inflation risks are tilted upward, while employment risks are tilted downward, which is a challenging situation." He emphasized that there is tension between the Federal Reserve's policy goals, and decision-makers must balance the dual missions of price stability and maximum employment. Since the policy rate is already in a restrictive range, the stability of indicators like the unemployment rate allows the Fed to consider policy adjustments more cautiously, but changes in the risk balance may force a policy shift. He warned the market that monetary policy does not have a preset path, and the committee will decide based on data.
Notably, Powell's description of the labor market is particularly significant. He stated that the labor market is "superficially balanced," but this balance comes from a sharp slowdown in both labor supply and demand, representing a "peculiar balance." This abnormal state indicates that the downside risks to employment are rising, and if these risks materialize, they will manifest in increased layoffs and a rising unemployment rate. He further pointed out that the current tariff-driven price pressures are mainly "one-off," and while they may persist for several months, they are unlikely to lead to a long-term inflation spiral.
This statement contrasts sharply with the tone of 2024, when the Fed emphasized that inflation remained the primary threat and insisted that the labor market was strong. Now, Powell acknowledges that inflation is still slightly above target while for the first time clearly indicating that both labor supply and demand are cooling, suggesting that future policy may consider employment risks more. Investors generally interpret this as a "dovish signal."

New Policy Framework: Symmetrical 2% Target and "One-off Rate Cut" Risks

In this speech, Powell also announced revisions to the Federal Reserve's monetary policy framework. He announced the removal of the "average inflation targeting" language introduced in 2020, returning to the traditional "flexible inflation targeting." The revised statement no longer emphasizes allowing inflation to moderately exceed 2% when it is persistently below target, but instead stresses maintaining price stability and maximum employment under various economic conditions. RSM's analysis indicates that this means the Fed is no longer inclined to prioritize employment support when inflation is sluggish, with the policy focus returning to the symmetrical 2% inflation target.
This change implies a hawkish tendency: once inflation exceeds 2%, the Fed may be more inclined to raise rates or maintain high rates to avoid losing control of prices. At the same time, the framework emphasizes that "under restrictive policy, changes in the risk balance may require policy adjustments." This emphasis on flexible adjustments has been interpreted by the market as the Fed opening the door for a rate cut in September. Brusuelas warned that if August employment data is slightly better or remains between 50,000 and 100,000, and inflation does not significantly decline, the Fed may only implement a one-off rate cut in September and then pause, similar to the "one-off rate cut" scenario of 2019. Therefore, he cautioned investors not to view the policy shift as the start of a long-term easing cycle.

Market Reaction: Stocks, Bonds, and Crypto Assets

Following Powell's speech, global asset prices fluctuated rapidly. Reuters reported that interest rate-sensitive sectors—homebuilders, banks, small-cap stocks, and utilities—generally rose. Market expectations for a rate cut probability jumped from 75% before the speech to 90%, causing short-term Treasury yields to decline sharply and the yield curve to steepen. The homebuilder index rose nearly 4% in a single day, the regional bank index increased by 4.1%, the small-cap Russell 2000 index surged by 3.8%, and the utilities sector hit a new high. The consumer and airline sectors also benefited, reflecting expectations of a consumption rebound due to rate cuts.
The money market also experienced dramatic changes. The U.S. dollar index fell sharply that day, reflecting market expectations that the Fed would end tightening sooner. The yield on the U.S. 2-year Treasury note quickly declined, indicating lower expectations for short-term rates. At the same time, the pricing for rate cuts in the prediction and futures markets significantly increased: Polymarket traders assigned an 80% probability to a rate cut in September, while the CME FedWatch tool showed the probability rising from 75% to 87%.
The cryptocurrency market experienced a "sell the news, buy the fact" cycle around the speech. Investopedia reported that before the speech, Bitcoin's price fell from its historical high of $124,290 on August 14 to around $112,000 by the afternoon of the 22nd. Traders generally believed Powell might continue a hawkish stance without specifying a rate cut, leading to significant liquidations and options positioning reflecting pessimism. However, after the speech released dovish signals, risk appetite quickly rebounded, with Bitcoin's price bouncing back to $116,500, and "Bitcoin proxy stocks" like MicroStrategy and Coinbase rising over 5%, while alternative coins like Ethereum and Solana also surged. The article also noted that cryptocurrency traders were originally more optimistic about rate cut expectations than traditional markets, and this difference narrowed after the speech.
This volatility reflects the close connection between crypto assets and macro liquidity. Lower interest rates reduce the opportunity cost of holding risk assets and increase the appeal of leveraged trading. Therefore, investors view Fed rate cuts as a catalyst for cryptocurrency price increases. However, the crypto market also faces the risk of capital outflows in a high-interest-rate environment. If a rate cut occurs as expected in September, but subsequent strong economic data leads the Fed to pause rate cuts, risk assets may come under pressure again.

Cryptocurrency: The Shadow of Liquidity and the Paradox of Safe Haven

For the crypto market, the Fed's policy direction has dual significance. On one hand, a rate cut means liquidity easing, driving up risk assets, with Bitcoin and Ethereum benefiting significantly. Investopedia noted that Bitcoin rebounded after the speech, and bets in the prediction market favoring rate cuts surged, indicating that investors see rate cuts as a signal of a crypto spring. On the other hand, the crypto market is also affected by macro uncertainties, with traders often adopting a "sell the news, buy the fact" strategy before interest rate policy announcements. The pre-speech sell-off of Bitcoin reflects concerns about the Fed not being dovish enough.
It is noteworthy that crypto assets are not completely decoupled from the real economy. Supply chain tightening due to trade wars and tariffs may raise the costs of mining machines and energy, thereby affecting the profitability of the mining industry. At the same time, the Trump administration's inconsistent regulatory stance on the crypto industry means that some new policies (such as encouraging strategic reserves of Bitcoin) may support market sentiment, while stringent anti-money laundering regulations may restrict exchange operations. Coupled with the cyclical bubbles and adjustments inherent in Bitcoin itself, the market cannot solely rely on interest rate logic. Overall, the Fed's dovish inclination is beneficial for crypto assets in the short term, but the long-term trend still needs to consider economic growth, policy regulation, and technological innovation.

Conclusion: Exploring Long-term Value Amid Policy Fluctuations

Powell's speech in Jackson Hole once again stirred global markets. He acknowledged the cooling labor market and hinted at a potential policy adjustment in September. The "peculiar balance" in the labor market and the phase-in inflation pressures caused by tariffs compel the Fed to seek a new balance between flexibility and stability. The market immediately viewed a rate cut as a high-probability event, leading to rebounds in stocks, bonds, and cryptocurrencies. However, the risks of inflation resurgence and policy reversal still exist. In this complex environment, investors need to remain cautious and closely monitor changes in employment and price data to navigate the risks and opportunities brought by macro uncertainties.
Beyond macro policy fluctuations, CEEX and its platform token CMC provide another long-term case worth noting. As a global exchange established in 2019, CEEX has accumulated through traditional payment systems, obtained a payment license in Singapore, and surpassed one million users, ranking high in liquidity. The platform token CMC employs a strict burning mechanism and contribution proof model, forming a deflation-driven value system. Its mining mechanism resembles "on-chain buybacks": users burn tokens to obtain computing power, which not only enhances their own returns but also reduces market circulation, achieving long-term scarcity. CMC also combines community incentives, allowing holders to enjoy IEO whitelist access, aggregation tool libraries, fee discounts, and VIP services, creating a win-win ecosystem for exchanges, brokers, and users.
It is noteworthy that CEEX is accelerating its global compliance efforts. The platform has obtained licenses in Canada, the U.S. MSB, and other regions, and has formally submitted an application for a VASP license to the Dubai Virtual Assets Regulatory Authority (VARA). If approved, CEEX will become one of the first Asian exchanges to operate in compliance in the Middle East and plans to launch Sharia-compliant products that adhere to Islamic financial rules, collaborate with local institutions to provide an Arabic service interface, establish a Middle East headquarters, and fully promote localized operations. Meanwhile, CMC will also integrate with local payment systems to support direct settlement in dirhams and deeply participate in the region's Web3 and metaverse development.
While macro policies influence market sentiment in the short term, the accumulation of long-term value requires reliance on transparent rules, compliant frameworks, and healthy token mechanisms. Unlike projects that depend on political hype, CEEX and CMC showcase an alternative path: providing investors with stable expectations and value protection through compliant trading facilities and deflationary economic models, beyond cyclical fluctuations. In the future, the acceleration of the digital economy in the Middle East will make Dubai an important testing ground for compliance and innovation in the global crypto market. Projects that find the best balance between regulatory compliance and decentralized ideals are more likely to occupy the high ground in the next wave.