Federal Reserve Chair Jerome Powell on Tuesday emphasized the central bank’s intricate balancing act, noting that policymakers are working to balance their mandates for price stability and employment following last week’s interest rate cut.
“Recent data indicate that economic growth has slowed down,” Powell stated in prepared remarks at the Greater Providence Chamber of Commerce’s economic outlook luncheon in Rhode Island, adding:
The unemployment rate is low but has increased slightly. Job gains have decelerated, and the risks to employment have heightened. Concurrently, inflation has risen recently and remains somewhat elevated.
He mentioned that clearer trade policies suggest tariffs will likely cause only a “one-time pass-through” effect on inflation. This may indicate a slight shift from previous warnings that tariffs could lead to more sustained cost pressures later in the year.
His remarks resonated with those of Vice Chair Michelle Bowman, who stated at the Kentucky Bankers Association’s annual convention on Tuesday: “The US economy has shown resilience, but I have concerns about weakening labor market conditions and softer economic growth.”
Powell warned that there is no risk-free approach to interest rates, facing both elevated inflation and rising unemployment. However, he suggested that the Fed is increasingly inclined to prioritize its employment mandate.
The Federal Open Market Committee (FOMC) voted last week to reduce interest rates by 25 basis points — the first decrease in nine months and a move that markets widely anticipated. While Powell refrained from commenting on the likelihood of another reduction in October, expectations are high that the Fed will cut rates in its final two meetings of 2025.
DBS Bank in Singapore characterized the Fed’s recent meeting as fraught with “dissonance and contradictions,” noting inconsistencies between policymakers’ economic forecasts and Powell’s comments.
The bank observed that officials projected faster GDP growth and lower unemployment, even while acknowledging “downside risks to employment.”
Related: Bitcoin faces challenges at $113K as Fed’s Bowman hints at quicker rate cuts
Bitcoin and crypto markets under pressure
Anticipations of further monetary easing have boosted risk assets broadly, but crypto markets encountered new selling pressure to start the week.
The divergence between Bitcoin (BTC) and equities was highlighted by market commentators The Kobeissi Letter, noting widening gaps across various asset classes.
Analyst Heisenberg noted that the significant deviation of Bitcoin from the Nasdaq is likely to converge again, citing historical patterns — an indicator that BTC could experience a swift rebound in tandem with the Nasdaq’s recent all-time high.
Other indicators suggest that Bitcoin’s correction may be short-lived. CoinShares reported Monday that Bitcoin exchange-traded funds attracted $977 million in inflows last week, raising total crypto inflows to $1.9 billion — a signal of ongoing institutional demand even under pressure on profit margins.
Economist Timothy Peterson told Cointelegraph that the trajectory of crypto could rise significantly once investors comprehend the extent of the Fed’s policy shifts.
“There has never been a gradual reduction in rates like the one currently anticipated,” he stated, adding that any indication of more aggressive easing could “boost Bitcoin and altcoins significantly.”
Magazine: 7 reasons why Bitcoin mining is a poor business idea
