Powell Stands Firm: Fed Prioritizes Tariff Impact Before Rate Cuts Amidst Trump’s Criticism

Federal Reserve Chair Jerome Powell is defending the central bank’s decision to maintain current interest rates, despite renewed attacks from President Donald Trump. Powell emphasized that the Fed is prioritizing an assessment of how tariffs will influence US prices before considering any adjustments to monetary policy. This stance comes amidst persistent calls from Trump for rate cuts to stimulate economic growth, alongside personal criticism of Powell’s leadership.
Trump, in a recent social media post, labeled the Fed chair as “very dumb” and attributed perceived economic damage to the central bank’s refusal to lower rates since December. He claimed that this inaction, partly stemming from the uncertainty created by his own administration’s economic strategies, would have long-lasting negative consequences for the US. Powell, however, maintains that the Fed’s “obligation” is to manage long-term inflation expectations.
During his appearance on Capitol Hill, Powell reiterated that Trump’s tariffs are “likely” to lead to increased prices, potentially complicating the Fed’s ongoing efforts to control US inflation. He acknowledged the frequent shifts in the administration’s policies, stating that their effects on the economy remain uncertain. The Fed chair noted that expectations regarding the ultimate level of tariffs, and their economic impact, peaked in April and have since receded.
Despite the potential inflationary pressures from tariffs, Powell stressed the Fed’s readiness to wait and gather more information before making any policy adjustments. At their recent meeting, Fed officials kept rates on hold but signaled a possibility of two cuts later this year, while also revising their inflation projections upwards and growth estimates downwards.