Mehab Qureshi
2 min read
Federal Reserve Chair Jerome Powell’s latest warning on the persistence of inflation due to global supply shocks has drawn reaction from crypto analysts.
“This morning Federal Reserve Chair Jerome Powell warned that ‘supply-shock’ problems from recent tariffs will likely keep inflation and interest rates high for some time,” said David Hernandez, Crypto Investment Specialist at 21Shares, in a statement shared with TheStreet Roundtable. “Unlike inflation caused by too much spending, these supply problems don't have a simple fix. This means the Fed might need to keep tight money policies even if the economy slows down and fewer people have jobs in the coming months.”
Hernandez explains that the inflation currently affecting the U.S. economy isn't primarily being driven by consumers spending too much — which the Federal Reserve can typically manage by raising interest rates. Instead, it's being caused by supply-side shocks, such as tariffs and disruptions in global supply chains. These shocks reduce the availability of goods and services, making them more expensive. Since this type of inflation isn’t easily controlled by tightening monetary policy (like rate hikes), it presents a tougher challenge for central banks.
Because of that, the Federal Reserve might have to keep interest rates high for longer, even if doing so causes economic growth to slow or leads to job losses. Typically, the Fed would lower rates to stimulate hiring and business activity during an economic slowdown. But if inflation remains stubborn due to supply issues, the Fed may feel forced to prioritize price stability over full employment — meaning fewer rate cuts and a tougher environment for households and businesses.
Powell made the remarks Thursday during a policy research conference, where he noted that the current Fed framework — which was overhauled in 2020 — may no longer fit today’s economic realities. The central bank is now reviewing how it approaches inflation and employment goals.
"We may be entering a period of more frequent, and potentially more persistent, supply shocks, a difficult challenge for the economy and for central banks," Powell said.
Officials are especially rethinking the language around “shortfalls” in employment, and the strategy of “average inflation targeting,” Powell said. “We will ensure that our new consensus statement is robust to a wide range of economic environments and developments,” he added.
Bitcoin rose past $100,000, showing strength in the face of economic uncertainty.
“Bitcoin’s push above $100K reflects optimism for global liquidity growth and its emerging importance as a safe haven asset when real interest rates are high,” Hernandez said. “Important milestones like Coinbase joining the S&P 500 and New Hampshire allowing up to 5% of public funds to be put in Bitcoin, show how BTC is changing from a historically risky bet to a serious investment for forward-thinking investors, companies, and even governments.”
