Jerome Powell says Fed would have cut rates already, but Trump's tariffs are getting in the way

US Federal Reserve Chairman Jerome Powell said that the US central bank would have already lowered interest rates this year if not for the inflationary effect of US president Donald Trump's uncertain tariffs on the country's trading partners, as per a report.

Jerome Powell Says Donald Trump's Tariff Plan Delayed Fed Rate Cuts

During the European Central Bank's annual forum in Sintra, Portugal, when he was asked if the Fed would have lowered rates again this year had Trump not announced his controversial plan to impose higher taxes on imported goods earlier this year, Powell responded, saying, “I think that’s right,” as quoted by CNBC in its report.

Donald Trump's Tariffs Raised Inflation Forecasts

The Fed Chair explained that, “In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” as quoted in the report.


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Fed in ‘Wait-and-See’ Mode

His latest remark came as the US central bank has entered a holding pattern on interest rates despite constant pressure from the White House, according to the report. Even last month, the Fed held the key borrowing rate steady, keeping Fed funds at the same range between 4.25% and 4.5% where it’s been since December, as reported by CNBC.

When Powell was asked if July would be too soon for markets to expect a rate cut during the forum, he answered, saying that he “really can’t say” and that “it’s going to depend on the data,” as quoted by CNBC. He said during Tuesday’s panel that, “We are going meeting by meeting,” adding, “I wouldn’t take any meeting off the table or put it directly on the table. It’s going to depend on how the data evolve,” as quoted in the report.

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Powell Stresses Fed’s Mission

The Fed chair even highlighted that, “All I want — and all anybody at the Fed wants — is to deliver an economy that has price stability, maximum employment, financial stability,” as quoted by CNBC. He even emphasised that, “What keeps me awake at night is: How do we get that done? I want to hand over to my successor an economy in good shape,” as quoted in the report.

Market Expects Rates to Hold Steady

While the CME FedWatch tool data showed that Fed funds futures traders are pricing in more than a 76% likelihood that the central bank once again holds rates steady at the July policy gathering, as per the report.

Trump Slams Powell Over Rate Inaction

However, the Fed’s strategy to keep rates where they are has angered Trump and his administration, who have publicly admonished Powell for the central bank’s failure to lower borrowing costs, and last week, Trump even called Powell “terrible” and said he was a “very average mentally person,” as quoted by CNBC in its report.

FAQs

Why hasn’t the Fed cut interest rates yet?
Because Trump’s tariff plans pushed inflation forecasts higher, making the Fed more cautious about lowering rates, as per the CNBC report.

Could rates be cut in July?
It is unknown because Powell said, it’s too soon to say. The Fed will wait for more economic data before deciding.