Fed Chair Jerome Powell on U.S. Economy, Inflation, and Crypto

On December 4, Federal Reserve Chair Jerome Powell, speaking at The New York Times DealBook Summit, provided a comprehensive overview of the U.S. economy, inflation trends, and his views on cryptocurrencies, particularly Bitcoin.

Economic Strength and Inflation: Powell described the U.S. economy as being in a “very good place,” highlighting robust growth and a resilient labor market. Inflation, while still a concern, has shown signs of easing. This economic strength allows the Fed to adopt a more cautious approach to lowering interest rates. The next Federal Reserve meeting, scheduled for December 17-18, will be pivotal in determining the path forward for monetary policy.

Cautious Rate Cuts: Given the economy’s stronger-than-expected performance, Powell indicated that the Fed could be more measured in its interest rate cuts. He noted that while growth is robust, inflation remains slightly elevated, necessitating a balanced approach. The Fed’s plans to lower rates in 2025 are clear, but the magnitude of these cuts remains uncertain. Powell emphasized the need to achieve a neutral interest rate level that supports stable economic growth.

Potential Impact of Tariffs: Powell addressed the potential impact of President-elect Donald Trump’s pledge to increase tariffs, which could affect consumer prices and keep inflation elevated. However, he stated that it is premature for the Fed to make policy decisions based on these potential tariffs, as their specifics and global reactions are still uncertain.

Governance and Political Dynamics: Powell faces a complex governance situation, given Trump’s past criticism of the Fed. Despite this, Powell expressed confidence in his relationship with the incoming Treasury Secretary, Scott Bessent, and anticipated a productive working relationship similar to those with previous Treasury secretaries.

Bitcoin and Crypto: Powell drew comparisons between Bitcoin and gold, describing Bitcoin as a speculative asset rather than a form of payment. He noted Bitcoin’s volatility and its role as a digital competitor to gold rather than the U.S. dollar. Powell emphasized the Fed’s focus on ensuring that interactions between the crypto industry and banks do not threaten the financial health of banks. He clarified that the Fed does not directly regulate crypto and, when asked, confirmed that he is not permitted to own crypto himself.

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