As stock markets faced significant declines for a second consecutive day on April 4, US Federal Reserve Chair Jerome Powell remarked that the Trump administration’s “reciprocal tariffs” could have a serious impact on the economy, potentially resulting in “increased inflation and sluggish growth.”
Speaking at a conference on April 4, Powell adopted a cautious stance, warning that tariffs could lead to a rise in inflation “in the upcoming quarters,” complicating the Fed’s aim of a 2% inflation target, especially after recent rate cuts aimed at achieving a soft landing. Powell stated,
“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.”
Shortly before Powell’s address, US President Donald Trump took to Truth Social to urge the Fed chair to “CUT INTEREST RATES,” criticizing Powell for being “always late.”
Source: Truth Social
The Fed now faces a significant decision: either pause interest rate cuts throughout the year or act quickly with rate reductions if economic weakness becomes apparent. While Powell emphasized that the economy is currently in a favorable position, he added that it was,
“Too soon to say what will be the appropriate path for monetary policy.”
On April 4, the unemployment rate rose to 4.2% in March from 4.1% in February. Conversely, March’s Non-Farm Payrolls reported an addition of 228,000 jobs, surpassing expectations and indicating economic resilience. The Consumer Price Index (CPI) also climbed by 2.8% year over year in March, with further data set to be released on April 10.
These figures underscore a robust labor market amid persistent inflation concerns, aligning with Powell’s caution regarding potential tariff impacts.
Related: Bitcoin bulls defend $80K support as ‘World War 3 of trade wars’ crushes US stocks
Powell’s warnings about rising inflation and slowing economic growth coincided with a dramatic drop in the DOW, which fell by 2,200 points, marking a 10% loss for the S&P 500 over two days. X-based markets resource ‘Watcher Guru’ reported that,
“$3.25 trillion wiped out from the US stock market today. $5.4 billion was added to the crypto market.”
Stock market losses hit $3.5 trillion. Source: Watcher Guru / X
Bitcoin to Entertain Further Volatility
Investors expect that Bitcoin (BTC) may experience increased volatility in the short term. Powell’s comments regarding tariffs driving “higher inflation” and possibly “higher unemployment” could shake traditional market investors, leading them to consider BTC.
Analysts have noted that BTC prices seem to be “decoupling” from the recent downturn in stocks. Although Bitcoin reached a 9-day high on April 2 before President Trump announced his “reciprocal tariffs” on “Liberation Day,” it experienced a sharp sell-off when the tariffs were disclosed during a White House press conference.
Since that announcement, Bitcoin has remained stable above the $82,000 mark, and as US equities fell on April 4, BTC surged to $84,720, exhibiting unusual price behavior.
BTC/USD price versus major stock indices. Source: X / Cory Bates
Independent market analyst Cory Bates shared the above chart and remarked,
“[…]Bitcoin is decoupling right before our eyes.”
With China’s retaliation involving 34% tariffs on US goods and Trump pressuring Powell to lower interest rates, heightened market volatility could drive Bitcoin’s price upward as investors seek a hedge against uncertainty.
During the 2018 U.S.-China trade war, Bitcoin’s price did not see any annual increase. However, it experienced considerable volatility and a 15% price spike when the trade war escalated mid-2018, marked by the US imposing tariffs on Chinese goods in July, followed by China’s own retaliatory measures.
Related: Bitcoin sentiment falls to 2023 low, but ‘risk on’ environment may emerge to spark BTC price rally
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
