Crypto Market Braces for Impact as Fed Governor Warns High Inflation Risks

Key Insights:

• Crypto market faces pressure as US inflation risks rise and Fed rate cuts get priced out.
• Fed governor shifts stance, citing oil surge and prolonged impact of the US-Iran conflict.
• Markets turn cautious as Powell signals no rate cuts without progress on inflation.

The crypto market remains under pressure amid intensifying US inflation concerns and mounting geopolitical tensions. The ongoing U.S.-Iran conflict has pushed oil prices higher, adding strain to the broader economy.

As inflation risks rise, traders are reassessing expectations for Federal Reserve policy. Consequently, markets are now pricing out near-term rate cuts, a shift that continues to weigh on digital assets.

Crypto Market Reacts as Fed Governor Highlights US Inflation Risks

Fed Governor Christopher Waller said his outlook on rate cuts has changed in recent weeks. He had initially supported easing following weak February labor data. However, rising US inflation risks and geopolitical uncertainty have altered his position.

Waller pointed to the prolonged closure of the Strait of Hormuz as a key driver of higher oil prices. He said the conflict appears likely to last longer than expected. As a result, he now sees inflation as a more pressing concern than before.

He backed the Fed’s decision to hold interest rates steady this week. At the same time, he noted that the current policy is already restrictive. While he does not support rate hikes, he said rate cuts could still occur later in 2026 if inflation eases.

Following this report, the crypto market recorded a total market capitalization of $2.4 trillion, up by 0.18% despite broader uncertainty.

Crypto Market Reaction Following Fed Governor Outlook | Source: CoinMarketCap

Meanwhile, the CMC20 index declined by 0.06% to $144.01, indicating mixed performance across major assets. At the same time, the Fear & Greed Index stands at 30, reflecting prevailing market fear and cautious investor sentiment.

Powell Reinforces Data-Dependent Policy as Inflation Stays Elevated

The chair of the Federal Reserve, Jerome Powell, also gave a warning at the most recent FOMC press conference. He declared that U.S. inflation has been above the target, with headline PCE at 2.8% and core inflation at 3.0%. Both numbers remain above the Fed’s 2% target.

Furthermore, Powell noted that there is no predetermined policy course. On the contrary, decisions will be made based on incoming data and changing conditions. He further said that the effects of geopolitical risks on inflation are too premature to truly evaluate.

He also warned that rising energy prices linked to Middle East tensions could keep inflation elevated in the near term. Therefore, he made clear that rate cuts will not occur without meaningful progress on inflation. This message has further reduced expectations for easing this year.

Market sentiment has already shifted in response. Polymarket data shows the probability of zero rate cuts rising from about 24% to 35% within a day. This move reflects how quickly expectations have changed as inflation risks increase.

Oil Prices and Policy Outlook Add Pressure on Crypto Market

At the same time, Bank of America has warned that a rate hike could become a possibility under certain conditions. The bank cited a stable labor market, continued leadership under Powell, and sustained oil price increases as key factors. It added that a hike becomes more likely if oil prices remain above $80.

The Iran crisis, now in its fourth week, further boosts energy prices. This trend adds further strain to U.S. inflation and the economy as a whole. Therefore, the crypto market is highly dependent on the changes in monetary policy expectations.

Despite Powell noting that a rate hike is not the base case, he still insisted that policy will rely on the inflation data. He also said he could remain in his position until Kevin Warsh is appointed. Bank of America said that a delay in that confirmation would affect future policy decisions.

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