Category: Events

• US Fed Jerome Powell spoke at the Economic Club of Chicago.
• Powell focused on
  • Integrating stablecoins with the US financial system.
  • Stressing the need to relax banking regulations on crypto.
  • Reducing public debt.
• Powell might be looking to bridge the gap between his and Donald Trump’s policies.

Full Video of the Speech

Trade and Tariff Policy

Tariffs were likely to generate a temporary rise in inflation, according to the Fed chairman. The US Fed said that it was less likely that inflation would be controlled in the short term, but in the long term, the US Fed is committed to keeping inflation around the 2% target.

Keeping the US inflation down was necessary, as per the chairman, to keep labor market conditions better.

Powell said that as some part of the new tariffs hit the American buyers, inflation is expected to rise. He added that it was the Fed’s responsibility to ensure that the inflation due to tariffs was a one-time phenomenon and would not impact the prices in the long run.

Will the Fed Intervene if Markets Plummet?

Jerome Powell said that the US Federal Reserve would not do so.

He said the markets were adjusting with uncertainty caused by the trade and immigration policies of the Trump administration. That uncertainty had caused the volatility. He added that despite the volatility, markets have been functioning well.

He concluded by saying that as long as markets continue to face historically unseen challenges, the volatility is expected to continue.

Need for Pro-Stablecoin Laws

The Fed chair finally admitted that cryptocurrencies, especially stablecoins, were increasingly being integrated into the mainstream financial system. The rise of stablecoins, according to the Fed Chairman, required new laws that better regulate them.

In the last half a decade, since 2020, stablecoin usage has risen through the roof.

In February 2025, Powell said in front of the Senate Banking Committee that pro-stablecoin laws were needed in the current markets.

Allowing Banks to Custody Crypto

In the Biden administration, banks were prohibited from taking custody of their customers’ crypto. Since the Trump administration ended all those executive orders, laws, and bylaws, current banks are free to take custody of cryptocurrencies deposited by their customers.

Powell stressed that allowing banks to legally take custody of crypto that their customers deposit would be good, given the increasing integration of stablecoins with traditional finance.

Unsustainable Public Debt

While responding to a question on Federal Debt, Powell acknowledged that at the current pace, the U.S. debt would become unsustainable, he said, although no one really knows the limit. He further added that countries have gone much farther than where the US lies currently.

VanEck had earlier suggested a plan where Bitcoin investments would be used to pay off 36% of the US Debt by 2049.

Powell also brought attention to very high interest payments that have been going on in the annual US government budget. Currently, interest has been one of the largest components of the US budget despite the economy doing well. Powell might be hinting towards the need for fiscal responsibility and not the evergreening of the US Debt.

The Interest Expense on US National Debt rose to a record $1.19 trillion in the last 12 months, an increase of 148% over the past 4 years. The US Government now spends more money on interest than it does on National Defense.https://t.co/l5IYmkf6Ih pic.twitter.com/h1sYdhXgyN

— Charlie Bilello (@charliebilello) April 16, 2025

• An overwhelming number of Polymarket users think there would be no rate cuts after the FOMC meeting on May 7.
• Markets desperately want at least a 0.25% rate cut in May, with some optimistic about a 0.5% cut.
• Crypto markets have been going through a liquidity crisis, and the lack of a rate cut could lead to a major crash.
• However, the US Fed has signaled that it would provide some relief in the form of quantitative easing.

Did you know? Polymarket is the largest crypto predictions platform that accurately predicted Donald Trump’s win in the 2024 elections.

Polymarket Users Shock Crypto Markets

In a shocking turn of events, almost 85% of Polymarket users think that the Federal Reserve will not cut interest rates in the FOMC meeting next month on May 7. Only a 13% minority of users think that there could be a 0.25% rate cut. Further, only 2% of users concur with the possibility of a 0.5% rate cut.

The results of this voting have shocked the markets, which have been expecting a relief from high interest rates which have been sucking liquidity out of the crypto and stock markets. The effective Federal Funds rate is now at 5.37% (repo-reverse repo window of 5.25% to 5.5%). These are the highest levels of interest rates for the US economy after the 2008 Global Financial Crisis.

High interest rates have caused mayhem in the crypto and stock markets in Q1 of January 2025, as there is very little investing power left in the hands of investors (after paying hefty interest rates on loans).

US Federal Reserve Indicates a Rate Cut

Thankfully, the US Federal Reserve has indicated (in its March 18-19, 2025 meeting) that quantitative easing would arrive in the US economy, which is another way of saying that more money will be infused in the US markets to combat the liquidity crisis.

Typically, more money is injected into the economy via lowering the interest rates, which increases the number of people taking debt and hence boosts spending in the economy.

What if the US Fed Doesn’t Cut Rates?

If the US Fed does not cut the interest rates, it would be going back on its statement of quantitative easing, something that has only occurred during a crisis.

Further, this time, as the tariff war between the US and other countries intensifies, it would require a rejuvenation of US manufacturing to stabilize the economy. This is only possible with cheap debt, which in turn depends on low interest rates.

Finally, the inflation in March has also cooled down to 2.4%, making it easier for the US Fed to cut rates further without having to worry about galloping inflation (like 2022).

If the US Fed does not provide a rate cut in its next meeting, it would be knowingly putting the economy in danger, something which has never happened.