- Trump’s sudden tariff hikes are shaking business confidence and pushing inflation concerns back to the center.
- The Federal Reserve stays cautious, holding rates steady while watching for signs of rising unemployment.
- Crypto markets could see big moves depending on how Powell signals the Fed’s next steps during Wednesday’s meeting.
The Federal Reserve officials expect to maintain current interest rates this week, while President Donald Trump’s new tariffs have introduced significant economic instability. High import taxes have disrupted international trade activities and lowered business confidence while pushing prices upward.
As a result, the Fed is rethinking its approach. The crypto market may also react sharply depending on the Fed’s tone since digital assets often respond to interest rate signals.
Tariffs Shake Confidence as Growth Slows, and Prices Rise
Trump’s quick tariff moves have strongly impacted the U.S. economy. A 0.3% decline followed a surge in imports ahead of the tariffs in first-quarter GDP. While consumer spending rose 1.8%, the slowdown in factories and business confidence shows growing strain. Officials expect the tariffs to raise inflation and job losses in the months ahead.
Former Fed Vice Chair Lael Brainard said the central bank will step in if job losses grow. She added that rising prices would shape their decisions, especially after recent high inflation. A strong shift toward cutting rates or a tough stance could quickly move Bitcoin and other digital coins.
The current issue is that tariff-related price spikes may affect inflation outlooks. Officials are worried that cutting rates too soon could push inflation higher without helping growth. The Fed is watching the job market closely for signs of weakness.
Fed Policymakers Divided on Response Timing
Fed Chair Jerome Powell and his team will likely keep a cautious stance. In April, Powell said the Fed faces a tough choice between holding rates to fight inflation or cutting them to support growth. He called it a “goalkeeper’s dilemma.”
Fed Governor Christopher Waller shared two possible paths. If tariffs drop, rate cuts could start later in the year. Larger rate cuts could happen sooner if tariffs stay high and job losses rise. Waller said a 0.1% monthly rise in joblessness could trigger action.
Other officials are more careful about cutting rates. Cleveland Fed President Beth Hammack said moving steadily helps avoid mistakes. Former Boston President Eric Rosengren said rate cuts won’t fix supply-related price increases and could even raise costs if demand stays strong.
Officials also talked about how long the inflation from tariffs may last. Waller said the impact could fade after this year. However, some members warned against repeating the 2021 mistake, when it kept rates too low during rising prices. Crypto investors may follow these inflation signs closely, as tighter policies usually hurt digital assets.
Powell Expected to Hold Steady as Markets Await June Forecasts
The March projections indicated potential interest rate reductions for 2025, although these assumptions could prove unreliable. Trump implemented a new tariff system that mandates a 125% duty on Chinese imports alongside delays for future trade discussions. The new developments have increased market volatility, complicating the Federal Reserve’s decision-making process.
Crypto investors expect Powell to show caution during his press talk on Wednesday. Michael Feroli of J.P. Morgan said the Fed will likely wait for clearer data before acting. Powell will likely focus on inflation control and job numbers.In addition, the next update is due in June.Crypto prices may shift quickly based on any new signals shared after the meeting.
