Bitcoin dipped 1.5% to $83,700 during remarks by Federal Reserve Chair Jerome Powell at the Economic Club of Chicago on Wednesday. The cryptocurrency later steadied at $83,800, down 0.5% over 24 hours. The S&P 500 also slipped 2% midday before partially recovering. The moves followed Powell’s cautious comments on inflation, tariffs, and monetary policy.
Powell said recent tariff increases imposed by President Donald Trump’s administration were larger than expected and may produce more persistent economic effects. He said inflation was likely to rise temporarily due to the tariffs but added it was too early to determine the long-term impact. “We may find ourselves in the challenging scenario in which our dual mandate goals are in tension,” Powell said, referring to the Fed’s goals of price stability and full employment.
Following his comments, traders adjusted expectations for interest rate cuts, with futures markets pricing in four cuts in 2025—up from two projected during the Fed’s March meeting. Some analysts warned the Fed risks falling behind the curve. “The market thinks the Fed is falling behind based on Wednesday’s price action,” said Bitwise analyst Juan Leon.
As Trump’s trade strategy focuses on China, investors remain uncertain how future escalations could influence the Fed’s decisions. Last week, Trump reduced “reciprocal” tariffs to 10% for most countries. Economists say the likelihood of a recession has declined since then, though inflation concerns persist.
At the same event, Powell addressed developments in digital assets, saying stablecoins “could have fairly wide appeal” if accompanied by consumer protections. He pointed out that past efforts to create a legal framework for stablecoins failed but said Congress is now revisiting the issue. “We need that. There isn’t one now,” he said.
Powell’s comments come as the Trump administration pushes ahead with crypto-related policy. Trump formed the President’s Council of Advisers on Digital Assets earlier this year, led by Bo Hines. Speaking at a summit in March, Hines said a stablecoin bill could reach Trump’s desk within two months. Both the House and Senate have passed stablecoin legislation out of committee.
The regulatory stance on crypto banking is also shifting. Powell said that while regulators had taken a cautious approach, there could be some loosening ahead. He emphasized the need to balance innovation with financial safety. The Federal Deposit Insurance Corporation (FDIC) recently announced plans to withdraw earlier guidance, allowing banks to engage in crypto activity without prior approval. The Office of the Comptroller of the Currency (OCC) also clarified its position supporting crypto involvement in federal banks.
