Hawkish Kevin Warsh
Benjamin Cowen examines Kevin Warsh's hawkish Jackson Hole speech, arguing that persistent inflation could keep interest rates higher and potentially bring quantitative tightening back into focus. He concludes that a future rate hike or QT announcement could trigger a temporary stock and crypto correction without necessarily ending the broader Bitcoin bull market, particularly if monetary policy later shifts toward easing.
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Read the Full SummaryKey Points
Benjamin Cowen says Warsh's speech is hawkish because inflation is not providing enough evidence that it is under control, and Warsh questions whether monetary policy is currently restrictive.
Cowen argues that the Federal Reserve could resume quantitative tightening as the artificial-intelligence market continues, noting that Warsh has previously favored reducing the Fed's balance sheet.
He expects an announcement of QT no earlier than December 2026, with early 2027 as the more realistic base case, although he acknowledges that he could be wrong.
Cowen says renewed QT would not automatically end a Bitcoin bull market, but he thinks crypto could repeat a pattern in which Bitcoin performs well while most altcoins lose ground relative to Bitcoin.
Warsh’s Hawkish Signal
Cowen introduces Kevin Warsh’s Jackson Hole speech, emphasizing his concern that inflation remains uncontrolled and monetary policy may not be restrictive enough.
QT Policy Returns
Cowen argues that quantitative tightening could return because Warsh favors reducing the Fed’s balance sheet and does not view QT as a simple substitute for rate hikes.
QT Timing And Bitcoin
Cowen sees a possible QT announcement as early as December 2026, with implementation more likely in 2027, but says it would not necessarily end Bitcoin’s broader bull market.
Rate Hike Probability
Market expectations shifted toward a September rate hike after Jackson Hole, though upcoming labor and inflation data could still change the outlook.
Midterm Market Correction
Cowen compares current conditions with prior midterm-year corrections and argues that a late-cycle rate hike could justify a temporary 10% to 20% stock market decline.
1990s Rate Hike Parallel
The 1997 rate hike initially produced a roughly 10% stock correction, illustrating how markets can reset sentiment before the larger business-cycle trend eventually changes.
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