Federal Reserve Chair Jerome Powell signaled on Tuesday that crypto banking regulations will be partially relaxed. He also made it seemingly clear that a near-term interest rate cut remains unlikely.
Speaking at the Economic Club of Chicago, Powell addressed mounting uncertainty stemming from trade policy and reinforced the central bank’s cautious stance.
Fed’s Powell Maitains a Hawkish Outlook
Powell’s remarks come as market expectations for a May rate cut have collapsed, with CME FedWatch data pricing in just a 16% chance. US equities dipped modestly following the speech. The equity market currently reflects investor disappointment over the lack of dovish signals.
“We should not rush to lower interest rates,” Powell said. “We have every reason to wait for more clarity before considering any changes to Fed policy.”
The crypto market, however, remained relatively steady. Rate cut optimism had already been priced out after last week’s hawkish FOMC minutes and cooler-than-expected CPI print.
Fed’s Interest Rate Cut Probability for May. Source: CME FedWatch
Powell also offered direct comments on digital assets.
“Cryptocurrency is becoming more popular. A legal framework for stablecoins is a good idea.”
He added that the Federal Reserve supports relaxing certain banking regulations on crypto. The Feds agree that the sector is maturing and requires more defined oversight rather than constraint.
The dual message—no imminent policy easing but a positive outlook for crypto regulation—was met with a muted response across digital asset markets.
Bitcoin hovered near $84,500, showing resilience despite risk-off sentiment in equities. Powell acknowledged that economic growth had likely slowed at the start of 2025 and warned that Trump’s tariffs are a “key source of uncertainty.”
He also noted the Fed is not close to ending quantitative tightening and may need to make difficult policy choices if inflation resurges.
While the Fed reaffirmed its readiness to provide dollar liquidity to global central banks if needed, Powell dismissed the idea of a Fed “put.” He said the central bank’s independence is “a matter of law.”
For crypto markets, the regulatory tone was a silver lining in an otherwise hawkish macro environment.
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