Fed’s Data-Driven Delay: Powell Links Rate Cuts to Tariff Clarity

Federal Reserve Chair Jerome Powell is linking any potential interest rate cuts to clearer data on the impact of tariffs, defending the central bank’s current delay in adjustments. This data-driven approach directly contradicts Donald Trump’s demands for immediate rate reductions to stimulate the economy.
Trump, in a recent social media outburst, called Powell “very dumb” and attributed significant economic damage to the Fed’s decision to hold rates since December. He claimed this was a result of the Fed’s “incompetence” and hinted at long-term repercussions. Powell, however, is steadfast in his commitment to the Fed’s independence and its role in maintaining economic stability.
Testifying before the US House of Representatives, Powell stated that Trump’s tariffs are “likely” to push up prices, potentially complicating the Fed’s efforts to control US inflation. He acknowledged the unpredictable nature of the administration’s policy changes, noting that their economic effects are still evolving. The Fed chair indicated that predictions about tariff levels and their associated economic consequences reached their highest point in April but have since declined.
Powell stressed the importance of the central bank’s commitment to “keep longer-term inflation expectations well anchored.” He stated that the Fed is in a strong position to observe and learn more about the economic trajectory before considering any modifications to its current policy stance. The Fed’s recent meeting saw rates remain unchanged, with officials hinting at potential future cuts while raising inflation forecasts.