In a scheduled hearing before the Senate Banking Committee about the effects of Covid-19 on the U.S. economy, Federal Reserve Chairman Jerome Powell signaled that high and persistent inflation is a growing concern and the Fed’s bond purchase program therefore may end sooner than expected. The major stock indices ended the day down between 1.55% and 1.92%, while the market capitalization of crypto, increasingly being watched as an inflation hedge, was up 0.5% Tuesday evening.
Fast facts
- “At this point, the economy is very strong, and inflationary pressures are high. It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at our November meeting, perhaps a few months sooner,” Powell said.
- The risk of the Covid variant Omicron wreaking havoc on the economy is a further unknown, Powell testified. “It’s not really baked into our forecasts,” he said.
- Powell’s testimony was seen as a turn toward a more aggressive stance by the Fed that could lead to tighter monetary policy, which would restrain cryptocurrencies such as Bitcoin. BTC was trading at around US$57,000 on Tuesday evening, down from US$58,200 when Powell’s testimony began, according to Coingecko.