Bitcoin soaked 1.5% in $83,700 during a statement by Federal Reserve Chair Jerome Powell at the Chicago Economic Club on Wednesday. Cryptocurrency later stabilized at $83,800, falling 0.5% in 24 hours. The S&P 500 skated at 2% noon before partially recovering. The move followed Powell’s careful comments on inflation, tariffs and monetary policy.
Powell said the recent increase in tariffs imposed by President Donald Trump’s administration was greater than expected and could create more lasting economic impacts. He said there is a high possibility that inflation will rise temporarily due to tariffs, but added that it is too early to determine the long-term impact. “We may be in a challenging scenario where double mission goals are tense,” Powell said, referring to the Fed’s price stability and full employment goals.
Following his comments, traders adjusted their expectations for interest rate cuts, with Futures Markets’ price cuts in 2025 four times, up from two times forecast during the Fed’s March meeting. Some analysts warned that the Fed’s risk would fall behind the curve. “The market believes the Fed is behind on Wednesday’s price action,” said Bitwise analyst Juan Leon.
With Trump’s trade strategy focusing on China, investors remain uncertain how future escalations will affect the Fed’s decision. Last week, Trump reduced “mutual” tariffs to 10% in most countries. Economists say that despite continued inflation concerns, the chances of a recession have been declining since then.
At the same event, Powell said that if it addresses the development of digital assets and involves consumer protection, Stablecoins could “have a fairly wide range of appeal.” He said past efforts to create a legal framework for stubcoin have failed, but Congress is currently reexamining the issue. “We need it. We don’t have it now,” he said.
Powell’s comments come as the Trump administration pushes forward with crypto-related policies. Trump established the Presidential Advisory Council on Digital Assets, led by Bohines earlier this year. Speaking at the March summit, Hines said the stubcoin bill could reach Trump’s desk within two months. Both the House and Senate passed committee laws.
The regulatory stance regarding crypto banks is also changing. Powell said regulators had taken a cautious approach but could loosen up a bit first. He emphasized the need to balance innovation with economic security. The Federal Deposit Insurance Corporation (FDIC) recently announced plans to withdraw its previous guidance, allowing banks to engage in cryptographic activities without prior approval. The Secretary of Currency (OCC) has made it clear that he is positioned to support cryptocurrency involvement in federal banks.