Federal Reserve Chair Jerome Powell told legislators on Tuesday that the central bank will need more time to examine whether recent tariff increases are boosting inflation, which is a critical issue before any interest rate cuts.
His remarks, presented in prepared testimony before the House Financial Services Committee, highlight the Fed’s cautious approach despite mounting political pressure from President Donald Trump for significant rate cuts.
“Increases in tariffs this year are likely to push up prices and weigh on economic activity,” Powell said, adding that the inflationary impact might be either temporary or long-lasting.
“For the time being, we are well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”
Powell’s comments are consistent with the central bank’s policy statement from last week, in which officials opted to keep the benchmark interest rate unchanged at 4.25% to 4.5%.
While no immediate changes were revealed, the Fed’s most recent predictions indicated two quarter-point rate decreases by the end of the year, based on officials’ median forecasts.
September in focus as markets eye first cut
The first rate cut for the Fed in September has almost been discounted by the markets.
More recently, however, divergence among Fed governors has brought some uncertainty.
With tariffs climbing, however, two Board members appointed by Trump have publicly hinted at reducing rates by July due to soft inflation figures.
Also, some have cautioned that while inflation pressures may be disappearing, they are only a few trade-policy developments away from reappearing.
Trump, who put Powell in the Fed’s top spot during his first term, has regularly slammed the central bank for being too late, has openly demanded huge cuts.
“We should be at least two to three points lower,” President Donald Trump said in a social media post ahead of the hearing, referring to interest rates.
He added, in reference to Fed Chair Jerome Powell, that he hoped “Congress really works this very dumb, hardheaded person, over.”
In his testimony, Powell stressed that the US economy is still strong, with low unemployment and inflation well off its post-pandemic high.
Trade policy still in flux as key deadline approaches
The evolving nature of US trade policy remains a significant variable for the Federal Reserve as it assesses the inflation outlook.
The potential implementation of broader tariffs on multiple countries by July 9 adds further uncertainty.
Jerome Powell added that the full impact of new trade barriers may take time to be reflected in consumer prices and corporate decision-making.
Powell did not specify a timeline for rate cuts, emphasizing a data-dependent approach.
This suggests the central bank is awaiting more definitive signals before shifting policy—an outlook that contrasts with the expectations of some investors and policymakers pushing for more immediate monetary easing.
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