Key Takeaways:
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President Donald Trump’s pushing for aggressive interest rates can trigger an inflation, weaken the dollar, and ensure long-term bond markets.
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Although there are no rates, trading policy and fiscal expansion are likely to push prices higher.
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Bitcoin stands to benefit either way-whether as an inflation fence in a quick cutting environment, or as a slow store of macro value of macro silently.
The US economy may be growing on paper, but the underlying stress is especially difficult to ignore – a tension now with the sharp focus on the Jackson hole symposium of the Federal Reserve. The US dollar has dropped more than 10% since January, the Core PCE Inflation has stuck to 2.8% and the July PPI has advanced 0.9%, expectations.
Against this backdrop, the 10-year Treasury yields holding 4.33% looks restless against a $ 37 trillion loan load. The question of interest rates has moved to the center of national economic debate.
President Donald Trump is now openly forcing Federal Reserve Chair Jerome Powell to cut interest rates by 300 points basis, pushing them up to 1.25-1.5%. If the Fed follows, the economy is flooded with cheap money, risk assets will steal, and accelerate inflation. If the fed argues, the effects of rising tariffs and the Fiscal shock From Trump’s newly passed, higher inflation can still push.
In either case, the US appears to be locked in an inflationary path. The only difference is the speed and violence of adjustment, and what it means for the price of bitcoin.
What if Trump forced the fed to cut?
If the fed bow in political pressure starting early in September or October, the consequences are likely to open quickly.
PCE’s main inflation could climb from current 2.8% to above 4% in 2026 (for context, post-covid rates and stimulus rates pushed the Core PCE to a peak of 5.3% in February 2022). A modified inflation of inflation is likely to drag the dollar further, perhaps sending the DXY below 90.
Financial emergence will lower a new cash box by around 4%, but as inflation expectations increase and foreign buyers retreat, the yields can move forward by more than 5.5%. According to Financial periodsMany strategists warn that such a spike can break the bull market.
Higher yield will have immediate consequences to fiscal. Interest payments to US debt can increase from around $ 1.4 trillion to $ 2 trillion – against 6% of GDP – by 2026, which motivates a debt delivery crisis and putting additional pressure on the dollar.
What is even more dangerous is Fed’s potential politics. If Trump finds a way to force Powell and assign a more following seat, markets may lose faith in the freedom of US financial policy. As FT columnist Rana Foroohar write:
“There is a huge body of research to show that when you drop the law policy as the president does to these unexpected threats to Powell, you will eventually raise, not less, the cost of borrowing and preventing investment in your economy.”
He mentioned Turkey as a cautionary tale, in which a central bank purge led to market collapse and 35% inflation.
If the Fed holds steady
Maintaining policy rates may seem like a responsible choice, and this will help maintain Fed institutional credentials. But it will not save the economy from inflation.
In fact, the two forces are already pushing prices higher: the tariffs and the great good bill.
The effects of tariffs can be seen in key economic indicators. The S&P Global Flash US Composite PMI rose to 54.6 in July, the highest since December, while input prices for services jumped from 59.7 to 61.4. Nearly two-thirds of manufacturers in the S&P Global Survey have linked higher costs of tariffs. As Chris Williamson, Chief Business Economist in S&P Global, Says:
“Increasing sales prices for goods and services in July, which has been one of the largest seen in the last three years, suggests that consumer price inflation will increase by more than 2% Fed target.”
The effects of the big good bills have not been felt, but the warnings are mounted by incorporating its increased expenditure and sweeping tax cuts. At the beginning of July, the IMF said the bill was “running the reduction of federal debt on a moderate term” and its lack of – rising risk steps that stabilized public finance.
In this situation, although there is no immediate reduction in the rate, the main inflation of PCE can be up to 3.0-3.2%. Yields in 10-year treasurys are likely to rise gradually, Reach 4.7% in the next day. Debt delivery costs will still climb an estimated $ 1.6 trillion, or 4.5% of GDP, elevated but not yet a catastrophe. DXY can continue, with Morgan Stanley Guess That it can go as low as 91 in mid -2026.
Even with this more measured outcome, the Fed does not appear to be unattractive. The debate on tariffs divides policy manufacturers. For example, Governor Chris Waller, seen as a possible new Fed seat, supports rate cuts. Macquarie strategist Thierry Wizman recently warned that such division within the FOMC can be dropped into political motivation blocs, weakening resistance to fed inflation and eventually the yield curve is steep.
Related: Bitcoin won’t go below $ 100k ‘this cycle’ as $ 145k target remains: analyst
The impact of macro on bitcoin
In the first scenario – sharp cuts, high inflation, and a collapsed dollar – Bitcoin is likely to be able to surge beside stocks and gold. With real interest rates that are negative and feeding the freedom in which it is discussed, crypto can be a preferred value store.
In the second scenario, the rally will be slower. Bitcoin can trade until the end of 2025, until inflation expectations will be caught in reality next year. However, as the dollar continues to weaken and the deficiencies are accumulated, the non-sovereign properties will gradually gain appeal. The proposed value of Bitcoin will strengthen not as a tech bet, but as a fence against systematic risk.
Looking forward to a Rate cut Continue to rise, but whether or not the Fed follows the fall or stable, the US is in a collision course with inflation. Trump’s aggressive fiscal stimulus and trade policy ensure that upward price pressure is baked in the system. If the deduction rates in Fed soon or not, the path ahead may be rough for dollars and long-term debt, and Bitcoin is not just included for the ride-it could be the only vehicle built for this road.
This article does not contain investment advice or recommendations. Every transfer of investment and trading involves risk, and readers should conduct their own research when deciding.
