Jerome Powell, the Chairman of Federal Reserve, has admitted that rising US inflation numbers were not “transitory”. To bring down inflation, Powell is looking at speeding up the Fed’s bond buying program.
Bitcoin’s value fell almost instantly by $2000 as the news dropped.
Powell: Inflation is not “transitory.”
Earlier today, the chairman spoke out about his plans as he testified before the Senate. He stated that the US economy is strong enough and inflation high enough to warrant a faster taper.
Powell stated, “It’s appropriate, I believe, for us to talk at our next meeting which is in a couple weeks, whether or not it will be appropriate that we wrap up our purchases earlier,”
Jerome Powell. Source: Barrons
The Federal Reserve announced plans to reduce its bond purchases in the next few months to alleviate inflation fears at the beginning of the month. The result was a Bitcoin price drop.
Powell and Janet Yellen, Treasury Secretary, have maintained for months that rising inflation is a temporary phenomenon. Supply chain problems and labor shortages are the main causes of rising costs.
After being questioned by Pat Toomey (pro-Bitcoin senator), Powell said that “transitory” isn’t the correct word. He stated that the Fed should “retire” the term and “better clarify” their meaning, given the fact that inflation has been well above its 2% target for many years.
Powell’s situation is worse because Powell’s new “omicron coronavirus” variant could create additional economic pressures, which may limit his ability safely to reduce inflation.
Bitcoin Falls On Tapering News
Powell’s hawkish comments seemed to have sent shock waves through the crypto market. Popular Bitcoin analyst Plan B noted that Bitcoin fell from $59k down to $57k after Powell’s comments.
BTC USD November 30th. Source: Tradingview
Bitcoin is being widely known as “digital gold” and an inflation hedge. Many believe that Bitcoin’s value proposition will be lost if inflation falls. Mike Novogratz, the billionaire CEO of Galaxy Investment Partners, would agree. He said that Jerome Powell’s renomination in his position as chairman is bearish on crypto and other inflation-hedge assets.
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