On May 15, Federal Reserve Chairman Powell spoke at the Thomas Laubach research conference, clearly stating that the Fed is reevaluating its monetary policy framework to respond to the "significant changes in the economic environment" after the pandemic. Although this review will not immediately change the current interest rate policy, it sends a strong signal: high "real interest rates" may become the new normal.
Rising real interest rates, can the old framework be sustained?
Powell pointed out that since the Fed implemented the "average inflation targeting" in 2020, the global economy has undergone profound changes. The pandemic, supply chain restructuring, changes in the labor market, and geopolitical risks, combined with persistent inflation, have led to continuously rising real interest rates.
This means that the originally loose policy framework of the Federal Reserve is facing challenges. Under the current mechanism, the policy has a higher tolerance for high inflation, but the current high inflation may not be a short-term phenomenon and may have even changed the underlying logic of the U.S. economy.
Some analysts point out that the Federal Reserve will focus more on "risk management" rather than sticking to the previously set average targets. The market generally interprets this as the Federal Reserve may not be able to "loosen" quickly to stimulate the economy as it did at the beginning of the pandemic.
The crypto market reacts quickly, Bitcoin rises back to $100,000
Although the Fed's review is still in its early stages, the crypto market has already reacted in advance. Bitcoin briefly surpassed the $100,000 mark on Monday, and Ethereum also steadily rebounded. Investors bet that if the Fed faces a dilemma between high inflation and high debt in the future, monetary policy will lean towards "relative looseness," and digital assets may once again become a safe haven for value.
Another signal is the inflow of institutional funds. On-chain data shows that Bitcoin holdings in U.S. ETFs and custodial channels continue to grow. This round of crypto asset increases is no longer just driven by retail sentiment, but is supported by deeper funding logic.
Against the backdrop of the long-term test of dollar credit, crypto assets are being seen again as an important tool for hedging uncertainty.
Lack of clarity in regulation, digital assets may enter the policy spotlight
Although Powell did not mention cryptocurrencies in his speech, the adjustment of the policy framework may imply a gradual clarification of the regulatory attitude towards digital assets.
Especially in the complex environment of "high real interest rates + high debt," the Fed may need to reassess the impact of crypto assets on financial stability in the future. Meanwhile, the promotion of central bank digital currencies (CBDCs) may also accelerate as a result.
Final words
Powell's speech conveyed a key signal: the Federal Reserve is entering a period of policy reassessment, and the crypto market has already sensed the shift in direction. Regardless of how future policies are implemented, the role of crypto assets is changing—from marginal assets to gradually becoming an important variable in the macro-financial structure.
In an era where uncertainty has become the "new normal," flexible responses and risk management may be the core that all investors should pay attention to.
