Bitcoin ‘decouples,’ stocks lose $3.5T amid Trump tariff war and Fed warning of ‘higher inflation’

US Federal Reserve Chair Warns of Economic Risks

As stock markets crumbled for a second day on April 4, US Federal Reserve Chair Jerome Powell expressed concerns about the potential impact of the Trump administration’s “reciprocal tariffs” on the economy.

Powell stated that the tariffs could lead to “higher inflation and slower growth,” making it challenging for the Fed to achieve its 2% inflation target.

“While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.”

Before Powell’s speech, US President Donald Trump called on the Fed chair to “CUT INTEREST RATES” in a post on Truth Social, taking a jab at Powell for being “always late.”

The Fed’s Dilemma

The Fed faces a critical choice: pause interest rate cuts throughout the year or respond quickly with rate reductions if the economy shows signs of weakening.

Powell noted that the economy is in a good place, but it’s too early to say what the appropriate path for monetary policy will be.

Labor Market and Inflation

On April 4, the unemployment rate increased to 4.2% in March from 4.1% in February, but March’s Non-Farm Payrolls added 228,000 jobs, exceeding expectations and reinforcing economic strength.

The Consumer Price Index (CPI) also rose by 2.8% year over year in March, with March data due on April 10.

The above figures highlight a strong labor market but nagging inflation concerns, aligning with Powell’s warning about potential tariff impacts.

Bitcoin to Entertain Further Volatility

Most investors anticipate that in the short term, Bitcoin (BTC) could see a surge in volatility due to Powell’s remarks about tariffs driving “higher inflation” and possibly “higher unemployment.”

Analysts have pointed out that BTC price appears to be “decoupling” from stocks recent downturn, with the price holding steady above the $82,000 level.

Since then, Bitcoin has rallied to $84,720, reflecting price action that is uncharacteristic of the norm.

Conclusion

The US Federal Reserve Chair’s warning about the potential impact of the Trump administration’s “reciprocal tariffs” on the economy has sent shockwaves through the financial markets. As the Fed faces a critical choice regarding interest rate cuts, investors are bracing for further volatility in the coming weeks. With China retaliating with 34% tariffs on US goods and Trump pressuring Powell to cut interest rates, market uncertainty could push Bitcoin’s price upward as a hedge against risk.

FAQs

Q: What did Jerome Powell say about the Trump administration’s tariffs?

A: Powell stated that the tariffs could lead to “higher inflation and slower growth,” making it challenging for the Fed to achieve its 2% inflation target.

Q: What did Donald Trump say about interest rates?

A: Trump called on the Fed chair to “CUT INTEREST RATES” in a post on Truth Social, taking a jab at Powell for being “always late.”

Q: What is the current unemployment rate?

A: The unemployment rate increased to 4.2% in March from 4.1% in February.

Q: What is the current price of Bitcoin?

A: The price of Bitcoin is currently holding steady above the $82,000 level and has rallied to $84,720 in recent days.

Q: What is the impact of tariffs on the economy?

A: Tariffs could lead to “higher inflation and slower growth,” making it challenging for the Fed to achieve its 2% inflation target.

Q: What is the current state of the labor market?

A: The labor market is strong, with March’s Non-Farm Payrolls adding 228,000 jobs, exceeding expectations and reinforcing economic strength.