Breaking: Jerome Powell Cools Further Rate Cut Expectations, Bitcoin Drops

Fed Chair Jerome Powell has tempered expectations for further rate cuts this year, warning that uncertainty surrounding the path of inflation remains high. His speech led to a notable dip in the Bitcoin price, as market participants still expect rate cuts at the October and December FOMC meetings.

Jerome Powell Dampens Rate Cut Expectations

In his speech at the Greater Providence Chamber of Commerce 2025 Economic Outlook Luncheon, the Fed chair stated that their policy is not a preset course and that they will continue to determine the appropriate stance based on incoming data, evolving outlook, and the balance of risks.

This came as he admitted that the near-term risks to inflation are rising, and downside risks to employment are also rising, which puts them in a challenging situation. Jerome Powell noted that the two-sided risks mean that there is no “risk-free path.”

The Fed Chair warned that if they ease too aggressively, they could aggravate the inflation risks and need to reverse course later to achieve their 2% target. On the other hand, he remarked that if they maintain the restrictive policy too long, the labor market could weaken unnecessarily.

With this double-sided risk, Powell stated that their framework calls for them to balance both sides of their dual mandate. Meanwhile, the Fed chair again reiterated that the downside risk in the labor market was what prompted the first Fed rate cut this year at the FOMC meeting last week. He claimed that this policy stance leaves them in a good position to respond to potential economic developments.

The Bitcoin price has dropped amid Jerome Powell’s speech, seeing as the Fed chair has suggested that further rate cuts this year are guaranteed. TradingView data shows that the flagship crypto is currently trading at around $112,700, down from an intraday high of around $113,300.

As CoinGape earlier reported, the Bitcoin and Ether ETF data already signaled a selloff sentiment ahead of the Fed chair’s speech. With this, BTC and the broader crypto market are at risk of continuing their declines, which began over the weekend.

Inflation Concerns And The Trump Tariffs Factor

Jerome Powell stated that the uncertainty surrounding the path of inflation remains high and that they will need to carefully assess and manage the risk of higher and more persistent inflation. The Fed chair stated that a reasonable base case is that the tariff-related effects on inflation won’t last long and will just be a one-time shift in the price level.

However, he warned that this one-time increase may not come all at once and that the tariff increases will likely take some time to work their way through supply chains. As such, he predicts that this one-time increase in the price level will likely be spread over quarters and possibly lead to higher inflation during that period.

Federal Reserve Presidents Raphael Bostic and Alberto Musalem have echoed Jerome Powell’s concerns about rising inflation. Bostic said that he doesn’t support further rate cuts this year, while Musalem said he would only support rate cuts if the labor market continues to weaken.

Meanwhile, Fed Governors Michelle Bowman and Stephen Miran believe that the primary focus should be on the softening labor market and that the Fed should make more rate cuts this year. Notably, Miran was the only FOMC member who dissented in favor of a 50-basis-point rate cut last week.