Ethereum rallied sharply on Friday after US Federal Reserve Chair Jerome Powell suggested the central bank could cut interest rates as early as September. Speaking at the prestigious Jackson Hole Economic Symposium, Powell acknowledged rising fiscal challenges, weakening jobs data, and tariff-driven inflationary pressures, while hinting that risks to the labour market now outweigh inflation concerns.

The remarks, while cautious and non-committal, triggered a wave of optimism across risk assets. Ethereum jumped more than 7% within hours of Powell’s comments, with liquidation data showing a strong swing towards long positions. Analysts say the speech may have marked the beginning of a more dovish Fed stance, offering relief to both traditional markets and digital assets.

Ethereum Leads the Rally

According to Coinglass data, crypto liquidations exceeded $200 million in the hour following Powell’s keynote. Notably, $180 million of these were short positions, with Ethereum alone accounting for over $110 million. The surge underscored renewed investor confidence in ETH, with traders positioning for potential fresh highs should a September rate cut be confirmed.

Ethereum’s strong performance mirrored broader enthusiasm across the altcoin sector. Meme tokens also enjoyed notable gains, with SPX rising 15% and DOGE and PENGU climbing around 8%. Market watchers noted that in previous cycles, Federal Reserve easing had often preceded a surge in speculative crypto assets.

CoinMarketCap’s altcoin season index ticked higher to 44, suggesting growing optimism about a liquidity-driven market rebound.

Powell Balances Risks

In his address, Powell took pains to describe the complexity of the current economic environment. He highlighted the drag from former President Donald Trump’s tariffs, rising inflation rates, and weakening employment figures. Importantly, he acknowledged that the Federal Reserve’s policy rate is now “100 basis points closer to neutral than it was a year ago,” leaving room for adjustment.

“What are the implications for monetary policy?” Powell asked rhetorically, before stressing that instability in the labour market now “allows us to proceed carefully as we consider changes to our policy stance.” He added that the shifting balance of risks “may require us to change our policy stance,” a phrase markets took as a clear signal of dovish intent.

Despite this, Powell avoided making concrete commitments. His remarks outlined scenarios where rate cuts would become urgent, but he stopped short of declaring that the threshold had already been reached.

Market Reaction and Analyst Commentary

Crypto analysts were quick to interpret Powell’s words as a positive signal. Nic Puckrin, investor and founder of Coin Bureau, commented:

“Powell’s Jackson Hole speech struck a positive tone for markets, with investors now largely pricing in a rate cut as soon as September. He signalled that the Fed’s focus is shifting toward the growing risks in the labour market, noting the unusual slowdown in both worker supply and demand, which raises the risk of sudden layoffs and higher unemployment. While tariff-related inflation remains a concern, Powell appeared more confident that these pressures will be temporary. His comments suggest that protecting the labour market now outweighs inflation risks, giving markets clarity on the Fed’s bias toward easing.”

That shift in tone has already translated into renewed bullish momentum across crypto, where liquidity-driven rallies are typically sharp and broad-based. Traders are eyeing Ethereum in particular as the leading beneficiary of the Fed’s softer stance.

Hope, Not Guarantees

While markets celebrated, Powell’s cautious language served as a reminder that policy remains data-dependent. He carefully framed his comments in the context of “hypothetical scenarios,” emphasising that while risks to the labour market have increased, inflationary pressures remain unresolved.

For crypto markets, the lack of firm commitments matters less than the narrative shift. The prospect of imminent monetary easing has already fuelled a surge in risk appetite, and Ethereum’s price action suggests investors are positioning for an extended rally.

Still, the Federal Reserve has yet to officially confirm rate cuts, and economic data in the weeks ahead will be decisive. Until then, traders and investors are left to speculate, buoyed by hope that Powell’s firm stance is finally softening.