If the Fed delays or confirms its rate cuts, Bitcoin will win.

Takeaways from the conference:

• Donald Trump’s aggressive push to cut interest rates could cause inflation to surge, resulting in a weaker dollar and destabilizing long-term bonds markets.

• Even if rates are not cut, trade policies and fiscal expansion will still likely drive prices higher.

• Bitcoin stands to benefit either way—whether as an inflation hedge in a rapid-cut environment, or as a slow-burn store of value as US macro credibility quietly erodes.

The US economy may be growing on paper, but the underlying stress is increasingly difficult to ignore — a tension now in sharp focus at the Federal Reserve’s Jackson Hole symposium. US Dollar is down more than 10% from January. Core PCE inflation has remained at 2.8%. July PPI increased by 0.9% and tripled expectations.

In this context, the 10-year Treasury yields at 4.33% are looking increasingly uncomfortable against a $37 Trillion backdrop debt load. In recent years, the question of interest rate has become central to national economic discussion.

Donald Trump has publicly pressed Federal Reserve chair Jerome Powell for a rate cut of up to 300 basis points. This would bring the rates down to 1,25-1,5%. Inflation will increase if the Fed follows through. If it does, then the economy will receive a flood of cheap money. If the Fed refuses to comply, rising tariffs will increase and accelerate inflation. fiscal shock The newly-passed Big Beautiful Bill by Trump could continue to drive inflation up.

Either way, it appears that the US is locked in an inflationary trajectory. It is only a matter of how quickly and violently the price adjustment occurs, as well as what that would mean to Bitcoin.

What happens if Trump orders the Fed to reduce?

If the Fed caves in to pressure from political sources as soon as September or even October, consequences will likely be swift.

Inflation in core PCE could rise from 2.8% at present to over 4% by 2026. (For context, after COVID rate reductions and stimulus in February 2012, PCE reached a high of 5.3%). An inflationary surge could push the DXY down to below 90.

Treasury yields would initially drop to around 4%. However, as inflation expectations increase and foreign investors retreat, the yields may rise above 5.5%. According to Financial Times. Many analysts warn that a sudden spike in the market could bring an end to it.

The fiscal impact of higher yields is immediate. Interest payments on US debt could rise from around $1.4 trillion to as much as $2 trillion—roughly 6% of GDP—by 2026, triggering a debt servicing crisis and putting further pressure on the dollar. 

A potential politicization by the Fed is more harmful. The markets may lose trust in US monetary policy if Trump is able to force Powell and nominate a chair who will be more compliant. As FT columnist Rana Foroohar wrote:

“There’s a huge body of research to show that when you undermine the rule of law the way the president is doing with these unwarranted threats to Powell, you ultimately raise, not lower, the cost of borrowing and curb investment into your economy.”

She used the example of Turkey, where an attempt to purge the central bank led to a collapse in markets and a 35% increase in inflation.

The Fed will hold steady

It might seem that keeping policy rates at current levels is a responsible choice, which would preserve credibility for the Fed. It won’t save the economy from rising inflation.

Two forces already drive prices upward: tariffs, and Big Beautiful Bill.

Key economic indicators are showing the effects of tariffs. The S&P Global flash US Composite PMI rose to 54.6 in July, the highest since December, while input prices for services jumped from 59.7 to 61.4. Nearly two-thirds of manufacturers in the S&P Global survey attributed higher costs to tariffs. As Chris Williamson, chief business economist at S&P Global, said:

“The rise in selling prices for goods and services in July, which was one of the largest seen over the past three years, suggests that consumer price inflation will rise further above the Fed’s 2% target.” 

Although the effects of Big Beautiful Bill have not yet been felt, warnings about its increased spending combined with sweeping tax reductions are mounting. The IMF said that at the start of July the bill “runs counter to reducing federal debt over the medium term” and its deficit‑increasing measures risk destabilizing public finances.

In this scenario, even without immediate rate cuts, core PCE inflation may drift up to 3.0–3.2%. In this scenario, yields on Treasurys 10-years will likely increase more slowly. reaching By next summer, the rate will be 4.7%. Even though debt service costs are high, they will still reach $1.6 trillion (or 4.5% of GDP), which is elevated, but not disastrous. Morgan Stanley says DXY may continue its downward spiral. predicting that it could go as low as 91 by mid‑2026.

The Fed is not unaffected by this outcome. Politicians are split over the debate on tariffs. Chris Waller supports rate reductions, for example. He is a potential new Fed chair. Macquarie Strategist Thierry Wizman said recently warned It is possible that splits among the FOMC members could lead to political groups, which would weaken Fed efforts to combat inflation. This in turn might cause the yield-curve curves steepen.

Related: Bitcoin won’t go below $100K ‘this cycle’ as $145K target remains: Analyst

Bitcoin: The effect of macroeconomics

In the first scenario—sharp cuts, high inflation, and a collapsing dollar—Bitcoin would likely surge immediately alongside stocks and gold. As real rates of interest are falling and Fed independence is being questioned, cryptocurrency could quickly become the preferred form of store value.

The rally in the second scenario will be much slower. Bitcoin may trade sideways through 2025 until inflation expectations finally catch up to reality in the next year. Non-sovereigns will become more popular as the dollar continues its decline and deficits continue to grow. Bitcoins’ value proposition will not be viewed as just a technical investment, but rather as an insurance against systemic risk.

What to expect from a rate cut Continue to rise. Whether or not the Fed stands firm or complies with the US, inflation is on the US’s radar. Trump’s aggressive trade and fiscal policies have baked upward pressure into the system. Whether the Fed cuts rates soon or not, the path ahead may be rough for the dollar and long-term debt, and Bitcoin isn’t just along for the ride—it may be the only vehicle built for this road.