Bitcoin (BTC) and the crypto markets rose on Friday after US Federal Reserve Chairman Jerome Powell appeared to express some reserved optimism about the US economy.
Powell spoke to students at Spelman College in Atlanta about the Fed’s ongoing strategy to tackle inflation.
The Fed chairman says inflation initially rose due to a combination of strong demand and limited supply due to the pandemic.
“The normalization of supply and demand conditions has played a crucial role in the disinflation to date, as has the substantial tightening of monetary policy and overall financial conditions over the past two years.
The strong measures we have taken have pushed our policy rate well into restrictive territory, meaning that tight monetary policy is putting downward pressure on economic activity and inflation. Monetary policy is believed to impact economic conditions with some lag, and the full effects of our tightening are unlikely to be felt yet. The strength of our response to inflation has also helped maintain the Fed’s hard-won credibility, keeping the public’s expectations of future inflation well anchored.”
Noting that the economic fallout from the pandemic is still unfolding, Powell acknowledges that uncertainty about the economy is “unusually high.” The chairman says Fed officials make decisions meeting after meeting.
“Like most forecasters, my colleagues and I expect spending and output growth to slow over the coming year as the effects of the pandemic and reopening fade and restrictive monetary policy weighs on aggregate demand. The FOMC (Federal Open Market Committee) is committed to bringing inflation down to 2% over time, and keeping policy tight until we are confident that inflation is moving toward that goal. It would be premature to conclude with confidence that we have taken a sufficiently restrictive position, or to speculate about when the policy might relax. We are prepared to further tighten the policy if this proves appropriate.”
Bitcoin is trading at $38,728 at the time of writing and is up almost 3% in the past 24 hours.
According to CoinGecko, the total cryptocurrency market capitalization has also increased by about 2% over the past day.
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