Powell Holds Firm on Rates Amid Tariff Uncertainty

Fed chair Jerome Powell.

Fed Chair Jerome Powell reaffirmed that since the Fed’s position on interest rates is still cautious, they won’t make any changes until a clearer view of how the current tariffs affect economic outcomes is available. Powell reiterated to Congress the importance of stability and maximum employment and noted inflation is still outside its target of 2%, adding that tariffs are an economic variable impacting the Fed's decision-making.

Powell noted that the Fed expects core inflation to rise to 2.6% in May, likely due to short-term impacts from tariffs. He reiterated that adequate data is needed at this time before the Fed makes policy changes. He also stated that political pressure, in the form of a negative comment by Trump, will not divert the Fed from its path of action.

The Federal Open Market Committee (FOMC) unanimously stayed at its current rate last week, although some members indicated differences. Some do not see a cut until 2025; others expect one or more cuts.

Trump urges an immediate rate cut, arguing it would lower the government's borrowing costs. At the same time, Powell countered that the Fed has a foreign need to control inflation and manage employment.