U.S. Federal Reserve Chair Jerome Powell has warned that the country is entering a period of tariff-driven inflation, triggered by Donald Trump’s newly introduced tariffs. Speaking at a press conference following the FOMC meeting, Powell's remarks rattled investors and fueled a strong bearish sentiment, causing Bitcoin to tumble sharply.
The Start of a New Inflation Wave?
During his speech, Powell stated that the market is now witnessing the early phase of rising inflation caused by trade tariffs. He emphasized that the impact could become more pronounced after August 1st, once reciprocal tariffs take effect. While it's still too early for a full assessment, Powell noted that consumer prices are already starting to reflect the pressure.
He also clarified that no decision has yet been made regarding a possible interest rate cut in September. The Fed, he explained, is holding off on any commitments due to ongoing uncertainties and unresolved risks.
Bitcoin Falls, Markets Panic
Powell's hawkish tone had an immediate impact on the crypto market. Bitcoin dropped sharply, falling below $116,000 from a daily high of $117,500 during Powell’s remarks. According to TradingView data, BTC is now attempting to recover and reclaim the $117,000 level.
Odds of a Rate Cut Drop
The speech also dampened expectations for a rate cut. According to CME FedWatch, the probability of a 25 basis point cut in September fell from 63.7% to 47.1% following Powell’s address.
October’s outlook remains similarly uncertain, with a 38.3% chance of a rate cut. The same 38.3% likelihood applies to the December meeting, where rates are now expected to remain unchanged.
All Eyes on Tomorrow’s PCE Data
Markets are now focused on the upcoming Personal Consumption Expenditures (PCE) inflation report, due tomorrow. This indicator is one of the Fed’s most closely watched inflation metrics. Analysts expect both the headline and core monthly PCE figures to come in at 0.3%. A lower number could boost market optimism and improve prospects for a shift in monetary policy.
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