Powell: Tariffs’ Unpredictable Impact Justifies Fed’s Rate Hold

Federal Reserve Chair Jerome Powell is asserting that the unpredictable impact of tariffs on US prices justifies the central bank’s decision to hold interest rates steady. This firm stance comes despite renewed attacks from Donald Trump, who is pushing for immediate rate cuts to stimulate economic growth and has leveled personal insults at Powell.
Trump, in a recent social media post, blasted Powell as “very dumb” and accused the Fed of “incompetence” for not cutting rates since December. He argued that this inaction, which he linked in part to his own administration’s inconsistent economic strategies, would incur long-term costs for the US. Powell, however, is prioritizing the Fed’s mandate to control inflation.
During his appearance before the US House of Representatives financial services committee, Powell stated that Trump’s tariffs are “likely” to lead to higher prices, potentially hindering the Fed’s ongoing efforts to curb inflation. He emphasized the fluid nature of the administration’s policies, noting that their economic effects remain uncertain. Powell indicated that expectations for tariff levels and their economic impact reached a peak in April before declining.
Powell highlighted the central bank’s “obligation” to maintain well-anchored longer-term inflation expectations and to prevent any one-time increase in prices from escalating into a persistent inflation problem. He concluded that the Fed is currently in a strong position to wait and gain more insight into the economy’s likely course before considering any policy adjustments.