The Federal Reserve expects U.S. President Donald Trump’s tariffs to stoke inflation, but it’s still too early to tell how they might affect the central bank’s monetary policy.

That’s the message Federal Reserve Chair Jerome Powell hammered home on Wednesday, striking a cautious tone while speaking before the Economic Club of Chicago.

“The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects,” he said. “We may find ourselves in the challenging scenario in which our dual mandate goals are in tension.”

The price of Bitcoin fell during Powell’s remarks, dropping 1.5% to $83,700 in around 90 minutes, according to the crypto data provider CoinGecko. Bitcoin was recently changing hands at about $83,800, down 0.5% over the past 24 hours. 

The S&P 500 temporarily buckled, falling 2% midday after paring back steeper losses earlier in the day, according to Yahoo Finance.

“‘It’s too soon to say’ is becoming a running theme in Powell’s speeches,” Bitwise Senior investment Analyst Juan Leon told Decrypt. “I hope that doesn’t turn into ‘It’s too late to fix.’” 

The market thinks the Fed is falling behind the curve based on Wednesday’s price action, Leon added, signaling a wait-and-see-approach may put the Fed in a tough position, where the central bank’s actions are perceived as lagging behind current economic conditions.

Powell noted that economic forecasts point to a slowdown but are still positive in terms of growth. He also said Trump’s tariffs are “highly likely to generate at least a temporary rise in inflation,” but it remains unclear whether those “effects could also be more consistent.”

Since Trump lowered “reciprocal” tariffs to 10% for most nations last week, economists’ odds of a recession in the U.S. have declined. With Trump’s trade efforts focused on China, however, investors are eager to understand how escalations could influence the Fed’s rate cut calculus.

Fed policymakers penciled in two rate cuts this year during their March policy meeting, but Fed futures traders expect the central bank will have to take more stimulative measures. After Powell’s remarks, traders foresaw four rate cuts in 2025, according to CME FedWatch.

Asked about crypto’s regulatory backdrop, Powell said there’s a “mainstreaming of that whole sector,” adding stablecoins could be a “good idea” as a product with “fairly wide appeal.” Powell did not specifically reference Bitcoin, but he underscored consumer protections.

Bitcoin has behaved more like a risk asset than a safe haven amid Trump’s trade war, but lasting shifts in the global economic order may reshape that dynamic, according to Messari analyst Dylan Bane. He told Decrypt that Trump’s stiff levies could serve as a catalyst.

“As tariffs reduce global trade and strain international cooperation, they also begin to undermine the foundations that support the US dollar’s role as the world’s reserve currency,” he said.

Edited by James Rubin