Jerome Powell Stays Cautious: No Rush to Cut Interest Rates

Jerome Powell stated that the Federal Reserve has no immediate plans to change interest rates, citing a strong economy. He emphasized that the labor market has stabilized at 4%, while efforts to curb inflation continue.

Sharing the Reserve’s policy, Powell stated:

With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance.

During the hearing, various financial aspects were discussed.

The Federal Reserve began raising interest rates in 2022 to combat inflation. Since then, the institution has made several adjustments. Typically, cryptocurrencies rise when interest rates are lowered, as traditional savings become less attractive and investors seek alternatives. It is also accounted for by the cheapness of debt capital in the market and, as a consequence, the increased demand for high-risk assets. 

Powell’s statement that interest rates will remain unchanged suggests that the crypto market will not experience significant volatility as a result.

The Fed Chair added that although inflation has eased, it remains above the 2% target. 

With the current measures, the target is expected to be achieved long-term without policy changes. However, depending on financial conditions, the Fed may adjust its interest rate approach as the economy evolves.

Powell’s Comments on the Crypto Industry 

Crypto was also addressed at the hearing as part of discussions on financial markets. Banking Committee Chair Senator Tim Scott raised concerns about restricted banking services for crypto businesses and an unlevel playing field.

He mentioned concerns over “debanking” and regulatory pressure on crypto businesses, referring to what some call “Choke Point 2.0,” a policy allegedly linked to the Biden administration. Powell stated he is committed to working with the Committee to address these concerns and revise the Federal Reserve’s supervision manuals.

Another notable point was his stance against the Federal Reserve issuing its own digital currency. Bernie Moreno, a Republican from Ohio, asked Powell:

Can I have your commitment that as long as you're the chairman of the Federal Reserve System, that we will never have a central bank digital currency?

Powell’s answer was a straight-up ‘yes'.

Will the US Economic Landscape Change Soon

The Federal Reserve has a big influence on U.S. monetary policy, but plenty of economic factors operate outside its control.

Take international trade tariffs, for example. Recently, President Donald Trump announced new tariffs on Mexico, Canada, and China, aiming to boost American manufacturing. In response, these countries introduced their own countermeasures.

So, what does this mean? 

Global trade is shifting, and businesses could feel the impact. Higher tariffs often lead to increased costs, which might push inflation even higher.

With uncertainty in the air, markets are reacting. 

Crypto is down from its January highs. Right now, Bitcoin is at around $96,100, Ether at $2,600, and SOL at $196. The total crypto market cap is about $3.16 trillion – down 2% in the last 24 hours. Meanwhile, the Fear and Greed Index sits at 35, signaling caution among investors.

With things changing quickly, businesses, investors, and policymakers are keeping a close eye on how the economy plays out.