As stock markets crumbled for a second day on April 4, US Federal Reserve Chair Jerome Powell said that the Trump administration’s “reciprocal tariffs” could significantly affect the economy, potentially leading to “higher inflation and slower growth.”
Addressing the public at a conference on April 4, Powell maintained a cautious approach and noted that tariffs could spike inflation “in the coming quarters,” complicating the Fed’s 2% inflation target, just months after rate cuts indicated a soft landing. Powell said,
“While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.”
Moments before Powell’s speech, US President Donald Trump called out the Fed chair to “CUT INTEREST RATES” in a post on the Truth Social, taking a jab at Powell for being “always late.”
Currently, the Fed faces a critical choice: pause interest rate cuts throughout the year or respond quickly with rate reductions if the economy shows signs of weakening. While the Fed official noted that the economy is in a good place, Powell said that it was,
“Too soon to say what will be the appropriate path for monetary policy,”
On April 4, the unemployment rate also increased to 4.2% in March from 4.1% in February, but on the contrary, March’s Non-Farm Payrolls added 228,000 jobs, which exceeded expectations and reinforced economic strength. In March, the Consumer Price Index (CPI) also rose by 2.8% year over year, with March data due on April 10.
The above figures highlight a strong labor market but nagging inflation concerns, thus aligning with Powell’s warning about potential tariff impacts.
Powell’s caution on higher inflation and slowing economic growth came on the same day that the DOW dropped 2,200 and a 10% two-day loss from the S&P 500. X-based markets resource ‘Watcher Guru’ announced that,
“$3.25 trillion wiped out from the US stock market today. $5.4 billion was added to the crypto market.”
Bitcoin to entertain further volatility
Most investors anticipate that in the short term, Bitcoin (BTC) could see a surge in volatility. Powell’s remarks about tariffs driving “higher inflation” and possibly “higher unemployment” could rattle traditional market investors, prompting a pivot to BTC.
In fact, analysts have pointed out that BTC price appears to be “decoupling” from stocks’ recent downturn. Although Bitcoin hit a 9-day high on April 2 before President Trump rolled out his “reciprocal tariffs” on “Liberation Day,” the price sold off sharply once the tariffs were revealed at a White House presser.
Since then, Bitcoin has held steady above the $82,000 level, and as US equities markets collapsed on April 4, BTC rallied to $84,720, reflecting price action, which is uncharacteristic of the norm.
Independent market analyst Cory Bates posted the above chart and said,
“[…]Bitcoin is decoupling right before our eyes.”
With China retaliating with 34% tariffs on US goods and Trump pressuring Powell to cut interest rates, market volatility could push Bitcoin’s price upward as a hedge against uncertainty.
During the 2018 U.S.-China trade war, Bitcoin price didn’t see any increase across the entire year. However, it experienced notable volatility and a 15% price rise when the trade war escalated in mid-2018, with the US imposing tariffs on Chinese goods in July, followed by retaliatory measures from China.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.