Federal Reserve Warns of Tariff Risks and Indicates Future Easing of Cryptocurrency Regulations for Banks

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Revealing Tariffs May Trigger Fed’s Dilemma

Possible Easing of Bank Cryptocurrency Regulations

The Federal Reserve’s ### Powell stated during a speech at the Chicago Economic Club last night that the uncertainty brought about by President Trump’s tariff policy is expected to lead to higher inflation and lower economic growth. However, it remains unclear which aspect the Fed should prioritize. He admitted that the Fed might face a dilemma between controlling inflation and supporting economic growth. In his prepared remarks, he said:

“We may find ourselves in a challenging situation where our dual mandate objectives are in tension. If this occurs, we will consider the distance of the economy from each target and the expected timeframe for closing those gaps.”

The Fed’s two main objectives are “stabilizing prices and employment,” but experts, including economists within the Fed, believe that tariffs pose a threat to both goals. In the Q&A session following his speech, Powell indicated that tariffs are likely to cause the Fed to deviate further from its targets, and this situation may persist for the remainder of the year.

Powell did not explicitly indicate the direction of interest rates, merely stating, “Currently, we are in a favorable position to wait for clearer circumstances before considering adjustments to our policy stance.” When asked whether the Fed would intervene in stock market volatility, Powell clearly stated “no,” emphasizing that the Fed’s primary mission is to achieve its dual mandate, rather than stabilizing financial markets.

Powell’s remarks revealed the dual threat of tariff policies to inflation and economic growth, raising market concerns regarding corporate profits, tightening monetary policy, and economic slowdown. Consequently, during his speech, U.S. stocks hit intraday lows, and U.S. Treasury yields turned downward. According to FedWatch data, the market expects the Fed to begin cutting interest rates in June, with three to four rate cuts of 25 basis points each anticipated by the end of 2025.

In addition to globally focused economic issues, Powell also indicated in last night’s interview that future regulations regarding banks and cryptocurrency assets may be relaxed. Powell pointed out that although the cryptocurrency industry has experienced a series of failures and scams in recent years, the overall atmosphere is gradually moving towards the mainstream. Therefore, the Fed will also adjust its stance in this regard.

“We have taken a relatively conservative position, with other banking regulatory bodies being even more conservative, setting strict limits on banks’ guidance and regulations regarding cryptocurrency assets. I believe there will be some relaxation in this area in the future.”

“We will attempt to promote these easing measures while ensuring the safety and soundness of the financial system, encouraging appropriate innovation, but also avoiding exposing consumers to risks they cannot understand or making banks unstable.”

Since President Trump took office in January, federal banking regulators have noticeably shifted towards a more open stance on digital assets. The Federal Deposit Insurance Corporation (FDIC) announced last month that it would rescind old guidelines and issue new guidelines that explicitly allow regulated banks to engage in legal cryptocurrency-related activities without prior approval. Additionally, the Office of the Comptroller of the Currency (OCC) has clarified that cryptocurrency business is permitted within the federal banking system.

Meanwhile, on Capitol Hill, lawmakers are rapidly advancing the establishment of a regulatory framework for stablecoins. The stablecoin bills in both the House and Senate have already passed through their respective committee reviews, and Trump has publicly stated that he hopes to sign the legislation soon.

Powell expressed his approval of this, stating that Congress’s efforts regarding stablecoins represent a positive development.

“Stablecoins are a digital product with the potential to reach a wide audience and should be subject to basic regulations such as consumer protection and information transparency,” he said, “which is precisely the goal both chambers are currently working to achieve.”