Federal Reserve Chair Jerome Powell will reiterate to lawmakers the central bank is in no rush to lower interest rates as officials wait for more clarity on the economic impact of President Donald Trump’s tariffs.
“The effects of tariffs will depend, among other things, on their ultimate level,” Powell said Tuesday in remarks prepared for delivery to Congress. “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 testimony before the House Financial Services Committee comes on the heels of the Fed’s decision last week to leave interest rates unchanged in a range of 4.25%-4.5%.
The central bank’s on-hold position has angered Trump, who has consistently called for lower rates and argued the Fed is keeping borrowing costs for the US government high by holding rates steady.
Trump Comments
“‘Too Late’ Jerome Powell, of the Fed, will be in Congress today in order to explain, among other things, why he is refusing to lower the Rate,” Trump said on social media early Tuesday. “I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come.”
Powell and several other policymakers have pointed to increased economic uncertainty stemming from the Trump administration’s stepped up use of tariffs, and other policy changes, to justify leaving rates steady for now. Many forecasters expect the tariffs to put upward pressure on inflation and dent economic growth, although those estimates carry significant uncertainty.
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Trump has frequently shifted on the specifics of his tariff policies, and the administration says it’s working on trade deals that could affect the nature and level of the duties.
“Expectations of that level, and thus of the related economic effects, reached a peak in April and have since declined,” Powell said in a statement that largely echoed remarks he delivered last week. “Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity.”
Powell said the tariffs’ impact on inflation could be short-lived or possibly be more persistent.
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Tariff Effect
Avoiding the latter outcome “will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices and, ultimately, on keeping longer-term inflation expectations well anchored,” he said.
Economic data so far has shown limited impact from tariffs. Fed Governors Christopher Waller and Michelle Bowman have pointed to that dynamic, among other factors, in arguing the Fed could cut as soon as its next meeting in July.
Meanwhile, Powell described the overall economy and labor market as solid. He said inflation had eased significantly from highs reached in mid-2022, but was somewhat elevated above the Fed’s 2% objective. He added that beyond the next year or so, most measures of longer-term expectations remain consistent with the Fed’s inflation goal.
