Federal Reserve believes that President Donald Trump’s tariffs will cause inflation in the United States, but at this point it is too early to say how these measures might impact the central bank’s monetary policies.
This was the message Federal Reserve chair Jerome Powell delivered on Wednesday. He struck a cautious note while Speaking Before the Economic Club of Chicago
He said that the level of tariff hikes announced to date is much higher than expected, and this is also likely true for the economic impact. We may be faced with a difficult scenario where our two mandates are at odds.
Bitcoin’s price fell by 1.5% in just 90 minutes during Powell’s comments, falling to $83,700. CoinGecko. Bitcoins were recently traded for about $83,800. This is a drop of 0.5% in 24 hours.
The S&P 500 temporarily buckled, falling 2% midday after paring back steeper losses earlier in the day, according to Yahoo Finance.
“‘It’s too soon to say’ is becoming a running theme in Powell’s speeches,” Bitwise Senior investment Analyst Juan Leon told Decrypt. “I hope that doesn’t turn into ‘It’s too late to fix.'”
The market thinks the Fed is falling behind the curve based on Wednesday’s price action, Leon added, signaling a wait-and-see-approach may put the Fed in a tough position, where the central bank’s actions are perceived as lagging behind current economic conditions.
Powell said that the economic outlooks indicate a slower growth but remain positive. Powell said Trump’s trade tariffs “are highly likely to cause at least temporary inflation,” although it is unclear if those effects “could also be more persistent.”
Since Trump lowered “reciprocal” tariffs to 10% for most nations last week, economists' Probability of recession The number of Americans who are enrolled in college has declined. Trump is focusing his trade war on China. However, investors want to see how this could impact the Fed rate-cutting calculus.
Fed policymakers predicted two rate cuts for this year in their March meeting. However, Fed futures traders predict the central banks will need to adopt more stimulative actions. After Powell’s comments, traders predicted four rate reductions in 2025. CME FedWatch.
Powell responded to a question about crypto regulation by saying that the whole industry is being mainstreamed. Stablecoins are a good idea as they have a wide audience. Powell made no specific reference to Bitcoin but did emphasize consumer protections.
Dylan Bane, Messari’s analyst, says that Bitcoin is more of a risky asset during Trump’s Trade War than it has been a haven. However, lasting changes in global economics may change this dynamic. He explained Decrypt Trump’s tough levies may serve as a trigger.
The US Dollar’s status as the global reserve currency is also threatened by tariffs, he added.
James Rubin is the editor
