Holding rates steady, the U.S. central bank took note of the possibility of higher inflation and unemployment.
The Federal Reserve is growing increasingly cautious about potential stagflation—a troubling combination of slowing economic growth and rising inflation that could limit the central bank’s policy options.
While Fed Chair Jerome Powell maintained that the U.S. economy is in “good shape” and stated the central bank is in “a good position to wait and see” before making further policy shifts, subtle language changes in the Fed’s latest policy statement hint at deeper worries about the nation’s economic trajectory.
The Fed opted to hold its benchmark interest rate steady during its most recent meeting. However, it acknowledged a growing risk of both elevated inflation and rising unemployment — classic indicators of stagflation not seen at scale since the 1970s. This dual-threat scenario puts pressure on the central bank, which may struggle to stimulate the economy without exacerbating inflationary pressures.
“The Fed is worried about stagflation,” said Zach Pandl, Head of Research at Grayscale, in a post on X. “We think that outcome would be good for Bitcoin.”
Pandl previously suggested that rising tariffs are a key driver of stagflation and tend to hurt traditional assets, while benefiting scarce stores of value such as gold — and increasingly, Bitcoin. He noted, “Bitcoin was not around for past stagflations, but it can be considered a scarce digital commodity and is gaining credibility as a modern store of value.”
Following the Fed’s announcement and Powell’s comments, Bitcoin price remained stable within a narrow range. It briefly surged to $97,500 amid optimism over U.S.-China trade negotiations before pulling back to around $96,500, marking a 1.6% gain over the past 24 hours.
The CoinDesk 20 Index (CD20) — a broader measure of the crypto market — edged up just 0.3%, as losses in XRP, AVAX, UNI, NEAR, and AAVE offset gains elsewhere, with those tokens falling between 1%-3%.
Meanwhile, U.S. stock markets rebounded slightly from earlier losses. The S&P 500 and Nasdaq Composite closed 0.4% and 0.3% higher, respectively, reflecting a cautious optimism among equity investors.
