Fed's Musalem Says More Data is Needed to Decide Whether a September Rate Cut is Warranted

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Summary:

Musalem said he agreed that his base case was now for tariffs to have a short-lived impact on inflation, while slowing economic growth posed greater risk of a slide in the job market.

St. Louis Fed President Alberto Musalem said on Friday he will need more data before deciding to support a rate cut at the Fed's September 16-17 meeting given that inflation is above the Fed's 2% target and is expected to move higher, while risks to the job market have yet to be realized.

"It is real that inflation is running closer to 3% than to 2%. That's real, and there is a possibility, not the base case, that there could be some persistence," Musalem told Reuters. "So that's one risk against the unrealized risk, not real yet, of a potential labor market deterioration."

"Policy now is in the right place for a full employment labor market and inflation running above target. It's in the right place ... to be leaning against inflation," Musalem said. "But that's at a full employment labor market. If you happen to assess there's risk to the labor market, then that initial policy setting needs to be adjusted."

"I will be updating my outlook and balance of risks all the way up and until two days, three days before the meeting," he said. "Then I'm going to decide."

Musalem spoke on the sidelines of the Fed's annual research conference here, where Fed Chair Jerome Powell in morning remarks pointed to a possible September rate cut given a "base case" that tariff-driven inflation would likely fade, while risks to the job market appeared to be rising.

"The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," Powell said, words that investors construed to mean that rate cuts are coming.

However, "the operative word there is 'may,' I think," said Musalem, a voter on interest rate policy this year.

His more noncommittal approach showed the ongoing reluctance among some policymakers to lower interest rates while inflation was both above the Fed's target and at risk of moving higher.

Musalem said he agreed that his base case was now for tariffs to have a short-lived impact on inflation, while slowing economic growth posed greater risk of a slide in the job market.

But he said he was hoping to get a fuller understanding of where the economy is heading to develop an opinion "about the whole path ... For me it's not just about September."

At the September meeting Fed policymakers will provide updated projections of where they think inflation, the unemployment rate and interest rates are heading. Prior to that they will receive what could be a pivotal jobs report, covering the month of August, that could either confirm the weakness some policymakers worry is developing, or leave intact the current assessment of an economy operating around full employment.

"Uncertainty is to some degree lifting," Musalem said. "We now have the outline of fiscal policy. We have the outline of trade policy. Now we know immigration policy. The more data we get, the better...I'm going to be able to assess, are tariffs passing through or not, and whether the labor market risks are real."

Source: Reuters

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Stocks

The US government has taken an $8.9 billion, 9.9% stake in Intel (INTC), buying 433.3 million shares in the chipmaker at a price of $20.47 per share.

The government’s investment in Intel will be passive ownership, with no Board representation or other governance or information rights, Intel said in a statement. Intel said the government also agreed to vote with the company's Board of Directors.

Intel said the government's equity stake will be funded by the remaining $5.7 billion in grants previously awarded but not yet paid to Intel under the US CHIPS and Science Act and $3.2 billion awarded to the company as part of the Secure Enclave program.

Intel will continue to deliver on its Secure Enclave obligations and reaffirmed its commitment to delivering trusted and secure semiconductors to the US Department of Defense. The $8.9 billion investment is in addition to the $2.2 billion in CHIPS grants Intel has received to date, making for a total investment of $11.1 billion.

The announcement late Friday comes after President Trump said earlier in the day his administration would take a 10% stake in ailing chip giant Intel. Trump called it a "great deal." Intel's stock closed up 5.5% after the president's announcement.

Intel stock fell 1% in after-hours trading on Friday after details of the deal were confirmed.

"President Trump’s focus on U.S. chip manufacturing is driving historic investments in a vital industry that is integral to the country’s economic and national security," Intel CEO Lip-Bu Tan said in a statement. "We are grateful for the confidence the President and the Administration have placed in Intel, and we look forward to working to advance U.S. technology and manufacturing leadership."

On Tuesday Treasury Secretary Scott Bessent told CNBC that the administration was exploring converting Intel's funding from the Biden-era CHIPS Act into equity aimed at stabilizing the company's US manufacturing business.

Intel is dealing with multiple issues across its businesses. Its manufacturing division is bleeding cash, just as its legacy computer chip segment forfeits market share to rivals Advanced Micro Devices (AMD) and Qualcomm (QCOM) in the PC space. Intel is also woefully behind AMD and Nvidia (NVDA) in the AI race.

The company's market capitalization of $111 billion is less than half of its value in 2021. And CEO Lip-Bu Tan has been forced to lay off 15% of the company's workforce and shelve plans to build plants in Europe.

But the troubled chipmaker is the only large-scale US-based leading-edge chip manufacturer, giving it geopolitical significance as the nation looks to reshore semiconductor production.

Trump's announcement comes the same week that SoftBank Group announced a $2 billion investment in Intel.

All of this comes as Intel continues to navigate its rocky turnaround plan that began under previous CEO Pat Gelsinger. Current CEO Lip-Bu Tan has scaled back Gelsinger's original vision, canceling construction of international plants and further delaying Intel's $20 billion Ohio chip complex.

Intel is fighting to bring customers into its third-party chip foundry business as it works to scale its newest 18A chip technology. The company has already signed agreements to build chips on its technology with Microsoft (MSFT) and Amazon (AMZN), but Intel is still the foundry business's largest customer.

As part of the deal, Intel said the government will receive a five-year warrant, at $20 per share for an additional five percent of Intel common shares, exercisable only if Intel ceases to own at least 51% of the foundry business.

The company is also contending with losing market share in the server business and client computing business to rival AMD, which also benefits from its own AI business. Intel has effectively been shut out of the AI race due to a lack of innovation compared to AMD (AMD) and Nvidia (NVDA).

Source: Yahoo Finance

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Cryptocurrency

Ethereum (ETH) recorded a blistering rally of over 15% in the past 24 hours and surpassed its 2021 all-time high of $4,869.47 on Aug. 22.

As of press time, the second-largest crypto was trading at a high of $4,888 and was continuing to move upward.

Federal Reserve Chair Jerome Powell prompted the price increase after signaling potential interest rate cuts at the Jackson Hole symposium. After Powell’s dovish remarks in Wyoming, the crypto market rallied more than 4% within the hour to reclaim the $4 trillion mark.

The Fed Chair stated that “the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” sparking widespread speculation about September rate cuts.

Odds on Polymarket of a potential 25 basis point cut in Sept. 17 jumped from 57% to 79% in a few hours after Powell’s speech.

UBS analysts noted that Powell’s dovish remarks represent “the framing and justification of an inflection in policy bias,” with the Fed Chair shifting mandate emphasis from inflation to employment concerns.

Market-Wide Rally

Bitcoin jumped more than 4% over the past 24 hours, climbing to roughly $117,000 as of press time.

Major cap altcoins followed Bitcoin and Ethereum. BNB recorded a new all-time high of $900 and is priced after climbing over 7% over the period, while XRP, Solana, and Dogecoin posted double-digit percentage gains.

Traditional markets mirrored crypto’s performance, with the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average each rising approximately 2%.

The US dollar weakened against gold and other major assets as investors anticipated easier monetary conditions.

Recovering from multi-year lows

Ethereum’s breakthrough marks a significant reversal from its multi-year low of $1,385.41 reached in April 2025, the token’s lowest price level since March 2023.

The rally damaged leveraged traders, with Coinglass data revealing over $553 million in liquidated positions during the past 24 hours.

Short sellers bore the brunt of losses, accounting for $308 million in liquidations, while long positions shed about $325 million. Ethereum dominated liquidation volumes with $251 million erased, followed by Bitcoin at $102 million.

The Fed’s potential September rate cut could expand liquidity further, potentially extending crypto’s current momentum as markets remain closely tied to US monetary policy decisions.

Ethereum Market Data

At the time of press 10:11 pm UTC on Aug. 22, 2025, Ethereum is ranked #2 by market cap and the price is up 15.69% over the past 24 hours. Ethereum has a market capitalization of $588.78 billion with a 24-hour trading volume of $71.47 billion.

Source: Cryptoslate

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Commodity

Russia-Ukraine Conflict

President Donald Trump again threatened Russia with “massive sanctions” over the war in Ukraine unless an agreement can be reached in about two weeks, swerving back to a tougher stance after an inconclusive meeting with President Vladimir Putin.

“I’m not happy about anything about that war — nothing, not happy at all,” Trump said Friday. “I think over the next two weeks, we’re going to find out which way it’s going to go. And I better be very happy.”

He said he would then make a decision “whether or not it’s massive sanctions or massive tariffs or both — or do we do nothing and say, ‘it’s your fight.’”

The threat, which came in response to questions from reporters in the Oval Office, is the latest case of Trump’s whipsawing stance toward Russia and Putin. Trump had demanded a ceasefire before he met with Putin in Alaska a week ago, but said after the meeting he was hopeful about the prospects for a deal.

But the likelihood of a truce dimmed again in the days since the summit, with Russian officials noncommittal about a possible meeting between Putin and Ukraine President Volodymyr Zelenskiy. Officials have also said Russia should have a say in security arrangements for Ukraine.

Speaking at a news conference with NATO Secretary General Mark Rutte in Kyiv on Friday, Zelenskiy reiterated his readiness for both a bilateral leaders’ meeting with Putin as well as a trilateral format including Trump.

“He is currently the only person who can stop Putin,” Zelenskiy said in Kyiv.

It wasn’t immediately clear how seriously to take the latest threat. Trump often suggests that something will happen in “two weeks” when he’s looking to buy time. Last month, Trump threatened 100% tariffs on Russia if it did not comply with his calls for a truce, and on July 28, he gave Russia 10 days to reach a ceasefire with Ukraine.

That deadline came and went without action. And Trump’s own team has offered contradictory views about possible sanctions. In an interview with NBC News last Sunday, Secretary of State Marco Rubio said he didn’t think “new sanctions on Russia are going to force him to accept the ceasefire.”

Even as Trump threatened Russia anew on Friday, he held up a photo of himself and Putin from their Alaska summit and said he would sign it for the Russian leader. Trump also raised the possibility Putin could attend the 2026 World Cup, which is being held in the US, Mexico and Canada.

“He’s been very respectful of me and of our country, but not so respectful of others,” Trump said. “That’s a man named Vladimir Putin, who I believe will be coming, depending on what happens.”

Source: Bloomberg

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Cryptocurrency

Political

The US Court of Appeals for the Second Circuit issued a mandate on Aug. 22 approving the dismissal of the appeals in the case between Ripple and the Securities and Exchange Commission (SEC).

The court order, shared by lawyer James Filan on X, officially ends one of crypto’s most consequential legal battles.

Despite the news, XRP’s price increased less than 1% within one hour, trading at $3.0694 as of press time.

The dismissal follows a joint filing on Aug. 7, in which Ripple and the SEC agreed to end their appeals after a formal Commission vote.

The agreement marks the conclusion of a dispute that began in December 2020 when the SEC sued Ripple Labs, CEO Brad Garlinghouse, and co-founder Chris Larsen for allegedly conducting an unregistered securities offering through XRP sales.

Legal battle concludes, ETF odds remain high

Under the settlement terms, XRP will not be classified as a security, representing a major victory for Ripple. Each side will cover its own legal costs, according to the court filing.

Ripple’s Chief Legal Officer Stuart Alderoty previously described the agreement as closing a chapter that has overshadowed the crypto industry for nearly four years.

The outcome places Ripple alongside other crypto firms like Coinbase that have successfully resolved enforcement actions with the SEC. Further, it removes regulatory uncertainty around XRP’s status, keeping the odds of approval of XRP exchange-traded funds (ETFs) high.

In February, Bloomberg ETF analysts Eric Balchunas and James Seyffart predicted 65% odds of approval for spot XRP ETFs in the US.

Polymarket bettors placed their odds of such an approval happening this year at 98% in early June, followed by a 10% slide after the SEC delayed decisions on multiple filings the same month.

Despite the sliding odds on the crypto-based prediction market, Balchunas and Seyffart raised their odds to “90% or higher” on June 20.

Polymarket traders continued to oppose the analysts, taking the odds to 62% in early August after the news that Commissioner Caroline Crenshaw opposed the approval.

However, Balchunas reiterated the high odds of approval of XRP ETFs: “Interesting, trades reporting how Polymarket odds of XRP ETF approval went down to 62% after the votes were disclosed showing Crenshaw voting no, but a) she’s gonna vote no on EVERYTHING and b) it’s meaningless, she’s outnumbered = we haven’t changed our odds, still at 95%.”

Source: Cryptoslate

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Central Bank

Stocks

US stocks soared on Friday as Federal Reserve Chair Jerome Powell opened the door for a September rate cut during his highly anticipated speech at Jackson Hole.

The Dow Jones Industrial Average (^DJI) rose nearly 2%, touching a record intraday high, while the S&P 500 (^GSPC) moved up about 1.6%, and the tech-heavy Nasdaq Composite (^IXIC) climbed 1.9%. Friday's surge came on the heels of a downbeat week for markets, as tech stocks were beaten up by AI trade doubts.

Fed Chair Powell opened the possibility of the central bank lowering interest rates in September on Friday, saying in his speech that "the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance."

With the speech touching both on the country's economic outlook and the Fed's new policy framework, Powell still noted that risks from inflation remain "tilted to the upside," saying that tariff-related inflation pressures "are now clearly visible."His remarks shook up rate-cut bets, which had been waning after a weak monthly jobs report. Traders on Friday were pricing in about 91.5% odds of a September cut compared to 70% earlier in the morning and 85% a week ago.

Meanwhile, the 10-year (^TNX) and 30-year (^TYX) Treasury yields fell after Powell's remarks. The commentary also spurred a gain in bitcoin (BTC-USD) and other cryptocurrencies, with ethereum (ETH-USD) leading the crypto gains.

The White House watched Powell's speech closely too, as President Trump has continued to push the Fed and Powell to lower rates. Trump opened a new front in his public pressure campaign on central bank independence by calling for the resignation of Fed governor Lisa Cook for alleged mortgage fraud. On Friday, Trump said he'll "fire" Cook if she doesn't resign, though legally, presidents cannot easily dismiss Fed governors.

On the earnings front, Zoom (ZM) stock popped Friday after reporting an AI boost, and Ross Stores (ROST) jumped as shoppers sought discounts amid tariffs. Intuit (INTU) and Workday (WDAY), meanwhile, slid.

Shares of Intel (INTC) jumped 5% after President Trump said the government will take a 10% stake in the ailing chip giant, calling it a "great deal."

Source: Yahoo Finance

Risk Warnings and Disclaimers

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Kevin Du

Central Bank

The anticipation around Fed rate cuts has been a dominant theme in financial markets, especially for cryptocurrency enthusiasts. Recently, Cleveland Federal Reserve President Loretta Mester Hammack delivered a clear message: exercise caution. Her statement, reported by Walter Bloomberg on X, indicates that a September rate cut appears unlikely based on current economic data. This crucial insight could significantly influence investor sentiment and market strategies across the board, including the volatile crypto landscape.

Why is the Cleveland Fed President Cautious on Fed Rate Cuts?

President Hammack’s remarks highlight a prudent approach to monetary policy. She emphasized that the Federal Reserve must remain vigilant, ensuring that inflation is definitively on a sustainable path toward its 2% target before considering any adjustments to interest rates. This cautious stance suggests that the Fed is prioritizing long-term price stability over immediate market demands for lower borrowing costs.

Her assessment that a September Fed rate cut is improbable stems from a careful evaluation of recent economic indicators. While some data points suggest a cooling economy, others indicate persistent inflationary pressures. The Fed’s mandate requires a balanced perspective, avoiding hasty decisions that could either reignite inflation or unnecessarily stifle economic growth.

What Does the Broader Economic Landscape Mean for Future Fed Rate Cuts?

The Federal Reserve operates under a dual mandate: achieving maximum employment and maintaining price stability. Navigating these objectives requires careful consideration of various economic factors. The current environment presents a complex picture, with robust job growth coexisting with inflation that, while declining, remains above the Fed’s comfort zone.

Market participants often anticipate Fed rate cuts to stimulate economic activity. However, the Fed’s primary concern is to avoid a resurgence of inflation, which could erode purchasing power and destabilize the economy. Therefore, any move to cut rates will be data-dependent, reflecting a clear and sustained trend towards the inflation target. Premature easing could undo progress made in taming price increases.

Inflation Data: The pace of disinflation is a key factor.
Employment Figures: A strong labor market provides the Fed more flexibility.
Consumer Spending: Resilience here can keep inflationary pressures alive.
Global Economic Factors: External events also play a role in the Fed’s calculus.

How Do Delayed Fed Rate Cuts Impact Your Crypto Portfolio?

Cryptocurrency markets are notoriously sensitive to macroeconomic shifts, and the prospect of delayed Fed rate cuts is no exception. Historically, lower interest rates tend to make riskier assets, like cryptocurrencies, more attractive as investors seek higher returns. Conversely, a prolonged period of higher rates can dampen enthusiasm for speculative investments.

For crypto investors, President Hammack’s cautionary signal suggests a continued environment of higher borrowing costs for longer. This could translate into reduced liquidity in the broader financial system, potentially affecting capital flows into digital assets. Investors should consider the following actionable insights:

Stay Informed: Monitor Fed communications and economic data closely.
Diversify: A balanced portfolio can mitigate risks during uncertain times.
Long-Term View: Focus on fundamental value rather than short-term fluctuations.
Risk Management: Assess your risk tolerance and adjust positions accordingly.

The Fed’s careful approach to monetary policy underscores a commitment to sustainable economic health. While the path to Fed rate cuts might be longer than some hope, this measured stance aims to create a more stable foundation for all asset classes, including cryptocurrencies, in the long run. Patience and strategic planning remain essential for navigating these evolving market conditions.

Conclusion: Cleveland Fed President Hammack’s signal for caution on rate cuts is a critical reminder that the Federal Reserve prioritizes a data-driven approach to monetary policy. Her unlikelihood of a September rate cut emphasizes the Fed’s commitment to tackling inflation decisively. For investors, particularly in the crypto space, this means preparing for a potentially extended period of higher rates and adjusting strategies to reflect a prudent, long-term outlook. Understanding these signals empowers you to make informed decisions in a dynamic financial world.

Frequently Asked Questions About Fed Rate Cuts

Here are some common questions regarding the Federal Reserve’s stance on interest rates:

Q: Why is the Fed being cautious about Fed rate cuts?A: The Fed prioritizes bringing inflation down to its 2% target sustainably. They want to avoid cutting rates too soon, which could cause inflation to rebound.
Q: What data does the Fed consider for Fed rate cuts?A: The Fed closely monitors inflation indicators (like CPI and PCE), employment figures, wage growth, and consumer spending data to guide its decisions.
Q: How do Fed rate cuts typically affect the crypto market?A: Lower interest rates generally make riskier assets like cryptocurrencies more attractive, as investors seek higher returns than traditional investments. Conversely, higher rates can reduce crypto appeal.
Q: Is a September Fed rate cut completely off the table?A: While Cleveland Fed President Hammack stated it’s “unlikely” based on current data, the Fed’s decisions are always data-dependent. Significant changes in economic conditions could alter the outlook, but the current sentiment leans against it.
Q: What should crypto investors do in this environment?A: Investors should stay informed about Fed policy, consider diversifying their portfolios, focus on long-term investment strategies, and practice sound risk management.

Did this article help clarify the Fed’s cautious stance on Fed rate cuts and its implications for the crypto world? Share this crucial insight with your network! Your friends and fellow investors will appreciate staying informed about these significant economic developments.