Jay Powell remains firm in the face of calls for a rate cut as early as July, believing that the US economy is strong and employment robust, making premature easing risky.
Despite political pressures from Donald Trump and internal divisions within the Fed, Powell warns that a rapid rate cut could reignite inflation, especially with trade tensions looming.
Crypto markets may face short-term pressure due to sustained high rates, but stable monetary policy can enhance their attractiveness in the medium term.
The US Economy is ‘Solid’, No Need to Speed Up
Jay Powell stands his ground. While some Fed members are starting to demand a rate cut as early as July, the Federal Reserve chairman holds firm: the economy is doing well, employment remains strong, and there is no justification for hastening monetary policy easing.
With inflation showing signs of stabilization, two notable voices, Chris Waller and Michelle Bowman, have recently voiced their support for a rate cut at the next FOMC meeting. However, Powell, expected to testify before the US Congress on Tuesday, is likely to strongly oppose this idea, emphasizing that growth remains supported and inflation could pick up if rates were lowered too quickly.
The labor market is close to full employment, and the economy remains in a solid position.
Trump Puts Pressure, But Powell Tempers
For several months, Donald Trump has been openly criticizing the current monetary policy. He has called Powell a “numbskull” and demands a significant rate cut, up to 3 percentage points. However, Powell, whose term runs until May 2026, refuses to yield to political pressure.
He acknowledges that the impact of tariff hikes imposed by Trump may be less severe than anticipated, but remains cautious: the new taxes could still weigh on economic activity and reignite inflation. In his prepared remarks, he warns that if these inflationary effects persist, any rate cut would be risky and premature.
Growing Dissensions Within the Fed
The Fed is now divided. Seven FOMC members believe rates will remain unchanged until the end of 2025. Ten others predict two or more cuts, while two support a single reduction. This results in uncertainty about the interest rate trajectory.
Reminder, the Fed’s target rate currently ranges from 4.25% to 4.50%, still significantly restrictive. It remains above the so-called “neutral” rate, which neither stimulates nor hampers the economy.
In essence: America has not yet emerged from the tunnel, and Powell wants to avoid a monetary misstep at all costs.
Impact on Crypto Markets?
Crypto markets hang on every word from Powell. Maintaining high rates means less short-term liquidity and potential pressure on risky assets like Bitcoin. But in the medium term, monetary stability can reassure investors and support market fundamentals.
In this context, any statement or shift in the Fed’s discourse, especially regarding the 2025 outlook, could trigger a new wave of volatility in both crypto and traditional markets.
