Federal Reserve Chair Jerome Powell told lawmakers Tuesday that the Fed is “well-positioned to wait” before making any moves on interest rates, citing uncertainty around the impact of President Trump’s tariffs on inflation and the broader economy.
Powell’s remarks, delivered during his semiannual testimony before the House Committee on Financial Services, reinforced the central bank’s cautious stance, even as pressure from the White House and some Fed officials grows louder.
“Increases in tariffs this year are likely to push up prices and weigh on economic activity,” Powell said. He added, “The effects on inflation could be short-lived — reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent,” echoing his comments from last week after the Fed held policy steady for a fourth straight meeting.
Powell emphasized that the Fed is “well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”
Under questioning from Rep. French Hill, a Republican and chair of the House committee, Powell acknowledged that “many paths are possible” for interest rates, including “cutting sooner” if inflation remains subdued or if the labor market weakens.
Still, when asked by another lawmaker if the two projected rate cuts this year—based on the median view of Fed policymakers—remain likely, Powell responded that “what will happen with rates is dependent on the economy and that is highly uncertain.”
The Fed chair’s cautious tone has further inflamed tensions with Trump, who has been publicly pushing for significant rate reductions.
Late last week, Trump called for the Fed to slash rates from 4.25%-4.5% to as low as 1%-2%, and blasted Powell and the Fed board, saying, “I don’t know why the Board doesn’t override this Total and Complete Moron!”
Trump echoed his frustrations early Tuesday morning in a social media post, saying Powell “will be in Congress today in order to explain, among other things, why he is refusing to lower the Rate,” and adding, “I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come.”
Trump is not alone in calling for cuts. Fed governors Michelle Bowman and Chris Waller have recently suggested the central bank should consider reducing rates as soon as the July meeting, citing mild inflation readings.
In a speech Monday, Bowman argued that recent inflation data has been soft and said trade policy would likely have “minimal impacts” on the Fed’s preferred inflation gauge. She also pointed to “recent softness in spending and signs of fragility in the labor market” as potential warning signs for employment.
Powell didn’t rule out a cut in July, but indicated the Fed would be closely watching both June and July inflation data—hinting that any move could be more likely in September if inflation remains muted.
“We are in a difficult situation in deciding when exactly to move,” he said.
Bowman and Waller’s comments add to signs of a growing rift within the Fed over how quickly to act.
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