Fed Chair Powell Says ‘We Would Have Continued Cutting’ Interest Rates If Trump’s Tariffs Didn’t Spark Inflation Fears
Federal Reserve Chair Jerome Powell told lawmakers on Capitol Hill Tuesday that a rate cut was unlikely in July and that he was considering one until President Donald Trump’s tariff announcements raised the prospect of rising inflation.
“Policy changes continue to evolve, and their effects on the economy remain uncertain. 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 said in his opening statement about the country’s monetary policy.
Later on, he addressed his past rate cuts and suggested they were likely to continue had Trump not intervened in foreign trade.
“If you just look at the basic data and don’t look at the forecast, you would say that we would have continued cutting. The difference, of course, is at this time all forecasters are expecting pretty soon that some significant inflation will show up from tariffs,” Powell said, adding:
And you know, we can’t just ignore that, but we’re not—we’re just saying let’s wait and see more, that’s all we’re doing. And if you will have noticed, a substantial majority of the committee has written down rate cuts in the remaining four meetings this year. So it’s just a question of being prudent and careful.
But at a time when the labor market is still strong, we don’t see weakness in the labor market. If we did, that would change things. You know, we’re going to continue to adapt as the data adapts. But that is the difference between then and now. Then, inflation was forecasted to continue to come down. Here it’s forecasted to go up by all forecasters. And again, we’re not overreacting to that.
We’re just saying, hey, as long as the economy’s strong, we can take a little bit of a pause here. And that’s what we’re doing. And again, continue to adapt as the data comes in. If we see data that suggests that inflation’s not going to produce big increases, you know, that would matter. And if we saw the labor market weakening, that would also matter too. But we don’t see those things.
Trump has publicly attacked Powell in recent months for not cutting interest rates, calling him “Mr. Too Late” and raising the specter of firing him, although Trump has said he won’t do that.
Watch the clip above.
