JAKARTA — U.S. jobs data and the direction of Fed Watch are back in the spotlight after Federal Reserve Chair Kevin Warsh said inflation is also a matter of how it is measured. The remarks drew investor attention to rate expectations, Nasdaq moves, Bitcoin, and AI stocks.
For markets, Warsh’s speech was not just about inflation theory. It touched a very real bet: when the Fed will ease policy, how quickly it will do so, and which data will guide the decision.
Warsh wants the Fed to use new data
Speaking at the European Central Bank Forum on Monetary Policy in Sintra, Portugal, Warsh said he wants the Fed to follow a “new course” and use new technology to read the economy in real time. He said he hopes that within 9-12 months, the U.S. central bank will be able to understand the economy “contemporaneously” so monetary decisions are more accurate.
“We are no longer just relying on data from government agencies that have measurement problems and surveys that are no longer relevant,” Warsh said.
The statement matters because it points to a major review inside the Fed. Warsh has formed five task forces, including one focused on data and another examining how central bank officials measure and respond to inflation. The focus is not just headline inflation versus core inflation. It is much broader than that.
Markets quickly interpreted the message as a sign that the Fed’s decision-making method could change. And if the measurement tools change, policy direction could shift as well.
Why U.S. jobs data also matters
In markets, U.S. jobs data often drives Fed Watch because labor market strength affects wage pressure and household spending. If employment remains solid, the Fed usually has more reason to keep rates higher for longer.
However, if labor data begins to cool, investors will raise expectations for rate cuts. That is why payroll reports, weekly jobless claims, and wage surveys are always heavily watched by market participants. One number can change sentiment. Fast.
Warsh also noted that traditional inflation measures do not always fully capture everyday living conditions. For that reason, the Fed could broaden its data set with indicators that better reflect consumer living costs, not just the official numbers markets have long used.
Many inflation gauges, many readings
The material Warsh discussed shows how different the results can be across indicators. May CPI showed headline inflation of 4.2% year over year and core inflation of 2.9%. Meanwhile, PCE, the Fed’s preferred measure, stood at 4.1% for headline and 3.4% for core.
On the other hand, the Dallas Fed “trimmed mean” showed a 2.4% pace over 12 months. The Atlanta Fed offered a more layered picture: sticky prices at 3.1% and flexible prices at 7%, the highest level since November 2022. Truflation, meanwhile, showed 1.75%.
The meaning is simple. Not every gauge tells the same story. Markets then have to choose which reading is most relevant for predicting rate moves. In that setting, Fed Watch becomes more complicated, not easier.
Claudia Sahm, chief economist at New Century Advisors, warned that inflation trends are not a guarantee of the final outcome. “Trend is not destiny,” she wrote. According to her, even a 2% trend does not ensure price stability because actual inflation can still move away from the current trend.
What it means for Nasdaq, Bitcoin, and AI stocks
Equity and crypto investors know the link between economic data and markets well. If U.S. jobs data weakens and inflation cools, bond yields can fall. That usually supports Nasdaq, growth stocks, and the AI sector, which is sensitive to the cost of capital.
Bitcoin also often responds to liquidity trends. When markets believe the Fed is nearing rate cuts, risk assets tend to get a lift. Conversely, if inflation heats up again or the labor market remains too strong, markets quickly scale back expectations for policy easing.
That is why U.S. jobs data is not just an economists’ issue. Stock traders, retail investors, and crypto holders are all waiting. One release can move prices. Sharply.
Warsh himself signaled that the Fed wants to be more responsive to the current economic environment. If that review truly changes how the central bank reads inflation and the labor market, the effects will be felt far ahead: from government bonds and Nasdaq to Bitcoin and AI stocks that have long been favored for their strong growth narrative.
“If we do our job, a year from now we will say that we found data that helped us make better decisions,” Warsh said. Markets will surely test that promise, number by number.
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