Federal Reserve Considers Lower Rate Cut Threshold Amid Tariff Debate

Federal Reserve Chair Jerome Powell is re-evaluating the criteria for potential interest rate cuts following internal debates on tariff impacts, suggesting a possible rate cut if inflation and labor market data weaken.

“We went on hold when we saw the size of the tariffs, and economic forecasts went up materially as a consequence of the tariffs,” Powell noted, highlighting the significant impact tariffs have had on economic forecast adjustments. The Federal Reserve’s internal debate over the impact of President Trump’s tariffs suggests a shift toward a lower threshold for rate cuts before summer’s end, potentially affecting financial markets.

Powell Hints at Conditional Interest Rate Cuts

Federal Reserve Chair Powell indicated a potential shift in the Fed’s policy towards interest rates amid ongoing discussions on the impact of Trump’s tariffs. As tariffs have influenced economic forecasts, Powell hinted at a “middle path” wherein smaller signals of inflation decline or labor market weakening could prompt rate cuts.

The possible lowering of the rate cut threshold stems from changes in tariff actions. Trump reduced some extreme tariffs, and tariff-linked consumer price increases did not materialize, contrasting with earlier forecasts. This has sparked an internal Fed debate on economic growth forecasts impacted by these changes.

Trump continues to advocate for quicker interest rate cuts despite Powell’s stance, attributing high rates to Fed policies rather than his own tariffs. Trump’s push adds pressure on the Fed, complicating the decision-making landscape amid internal disagreements among policymakers.

Bitcoin’s Price Surge in Economic Uncertainty

Did you know? In past tariff-induced economic tensions, such as the U.S.-China trade war, Bitcoin sometimes rallied as a perceived safe haven, although persistent high rates typically dampen speculative flows.

As of July 10, 2025, Bitcoin (BTC) is valued at $111,360.71 with a market cap of $2.21 trillion, holding a 63.93% dominance. The circulating supply stands at 19,890,090 BTC of a maximum 21 million, per CoinMarketCap, showing a 2.35% 24-hour price increase.

Coincu’s research team highlights that Fed policy shifts could influence financial markets and regulatory scenarios, as reduced rates might trigger investment flows into risk assets like cryptocurrencies. This underscores the importance of careful monitoring of macroeconomic indicators.