As the stock market collapsed on the second day on April 4, US Federal Reserve Chairman Jerome Powell said the Trump administration’s “mutual tariffs” could have a major impact on the economy, potentially leading to “inflation and slow growth.”
To the public at a meeting on April 4, Powell maintained a cautious approach, noting that tariffs could surge inflation “in the coming quarter” and that the Fed’s 2% inflation target could be complicated just a few months after interest rate cuts showed a soft landing. Powell said,
“Taxes are very likely to generate at least temporary rises in inflation, but the impact could also be more sustained.”
In a moment before Powell’s speech, US President Donald Trump called out for the Fed’s chair, “cutting interest rates” in posts about the True Society, and took a jab to “always behind” in Powell.
Source: Truth Social
The Fed is currently facing important choices. If the economy shows signs of weakening, either suspend interest rate cuts throughout the year or respond quickly with interest rate cuts. Fed officials said the economy is in a good place, but Powell said it is.
“It’s too early to say something that would be the right path for monetary policy.”
On April 4th, the unemployment rate in March also rose from 4.1% in February to 4.2%, but on the contrary, non-farm salaries in March added 228,000 jobs, exceeding expectations and strengthening their economic strength. In March, the Consumer Price Index (CPI) also rose 2.8% from the previous year, with data scheduled for March on April 10th.
The above numbers highlight a strong labor market but are consistent with Powell’s warning about the potential tariff impact due to inflation concerns.
Related: Bitcoin Bulls crush US stocks protecting $80k support as “the third world of trade war”
Powell’s attention on Powell’s slower inflation and economic growth came on the same day that the Dow reduced its two-day losses from the S&P 500 to the 10%. X-based market resource “Watcher Guru” has announced it.
“Our $3.25 trillion has been wiped out from the US stock market today. $5.4 billion has been added to the crypto market.”
Stock market losses reached $3.5 trillion. Source: Watcher Guru / X
Bitcoin to entertain even more volatility
Most investors expect Bitcoin (BTC) to be able to see a surge in volatility in the short term. Powell’s comments on tariffs that drive “higher inflation” and perhaps “higher unemployment” could rattle traditional market investors and encourage a pivot towards BTC.
In fact, analysts point out that BTC prices appear to be “segregated” from recent stocks. Bitcoin hit a nine-day high on April 2nd, but before President Trump deployed “mutual tariffs” on “liberation day,” the price was sold significantly after tariffs were revealed at the White House press.
Bitcoin has since been stable above the $82,000 level, and BTC has reached $84,720 as the US stock market collapsed on April 4th.
BTC/USD prices and major stock indexes. Source: X/Cory Bates
Independent market analyst Corey Bates said in posting the chart above.
“(…) Bitcoin is separated right in front of me.”
Market volatility could increase Bitcoin’s price as a hedge of uncertainty as China retaliates with a 34% tariff on US goods and Trump is putting pressure on Powell to cut interest rates.
During the 2018 US-China trade war, Bitcoin prices did not increase year by year. However, it experienced significant volatility and a 15% price rise when the trade war escalated in mid-2018. The US imposed tariffs on Chinese goods in July, followed by retaliation measures from China.
Related: Bitcoin sentiment will be lower in 2023, but environmental “risks” could emerge.
This article does not include investment advice or recommendations. All investment and trading movements include risk and readers must do their own research when making decisions.
