BitMEX co-founder Arthur Hayes sparked debate on Thursday ahead of Federal Reserve Chair Jerome Powell‘s pivotal Jackson Hole speech, declaring he wants “no cut” in interest rates to force President Donald Trump into unconventional fiscal measures.
Hayes Predicts Powell-Trump Showdown
Writing on social media platform X, Hayes framed Friday’s address as a critical test: “Will Jay cut and become Trump’s twink, or choose violence becoming Volker 2.0?”
The crypto entrepreneur referenced former Fed Chair Paul Volcker‘s aggressive 1981 rate hikes to 21.5%, which triggered a severe recession but ultimately tamed inflation. Hayes suggested Powell might similarly resist political pressure, forcing Trump to activate what he termed the “brr btn”—a reference to money printing or quantitative easing.
Fed Independence Under Political Fire
Trump has escalated attacks on Powell in recent months, calling him a “bad person” who keeps rates “artificially high” at 4.25%-4.5%. The president demanded rates drop to “1% or 2%” and threatened to replace Powell when his term expires in May 2026.
Treasury Secretary Scott Bessent indicated the administration could nominate a successor by October, potentially creating a “shadow Fed” months before Powell’s departure.
Markets Price In Rate Cut Optimism
Futures markets show 75% odds of a 25 basis-point cut at September’s Federal Open Market Committee meeting, down from 92% last week. Cryptocurrency prediction platform Polymarket puts an 85% probability on rate cuts by year-end, with nearly $990,000 wagered.
The optimism contrasts with mixed economic signals. July producer prices surged at the sharpest pace since mid-2022, while recent consumer inflation data cooled expectations.
Jackson Hole Stakes Rise
Powell’s Friday 10 a.m. ET speech on “Economic Outlook and Framework Review” could signal the Fed’s September direction. Analysts expect cautious messaging rather than explicit rate cut commitments.
Goldman Sachs economists believe Powell may emphasize labor market risks while stopping short of “decisively signaling” September cuts. Morgan Stanley chief economist Michael Gapen predicts the Fed will “remain on the sideline” through year-end.
Hayes’ “no cut” stance reflects his belief that maintaining higher rates would compel Trump toward fiscal stimulus similar to former Treasury Secretary Janet Yellen‘s 2022 strategy of issuing more Treasury bills than bonds to inject liquidity while the Fed held rates steady.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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