Jerome Powell, chairman of the Federal Reserve, signaled a more cautious approach to interest rate cuts, with a growing number of Fed officials now expecting fewer reductions than previously forecast. While the median rate path remains unchanged, Powell emphasized that progress on inflation has been slower than anticipated and will remain uneven through the year.
Powell highlighted that tariff-driven inflation should show meaningful improvement by mid-year, though some oil price shocks will feed into core inflation metrics. The Fed chief acknowledged uncertainty around the economic consequences of Middle Eastern geopolitical tensions, noting that prolonged elevated gasoline prices could pressure consumer spending and employment. He stressed that the persistence of inflation above the Fed's 2% target for five consecutive years raises concerns that any fresh economic shock could destabilize inflation expectations.
The remarks reflect a firmer inflation stance than recent market expectations. Powell delivered a critical warning: rate cuts will not materialize unless the Fed observes clear progress in bringing inflation down. This conditionality signals the central bank's willingness to hold rates steady or maintain restrictive policy longer than markets have priced, with significant implications for cryptocurrency volatility given digital assets' historical sensitivity to Fed policy shifts.