Fed Chair Jerome Powell reveals why interest rates haven't been cut
Federal Reserve Chair Jerome Powell struck back at President Donald Trump on Tuesday, claiming his sweeping tariff plan is the main reason he has not lowered interest rates. 'Increases in tariffs this year are likely to push up prices and weigh on economic activity,' Powell told members of the House Financial Services Committee.
'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,' the Fed chair testified. Powell has served atop the Federal Reserve since 2018 and has long caught the ire of the president, who has recently nicknamed the banker 'Too Late' Powell for not yet lowering the cost of borrowing.
'We should be at least two to three points lower. Would save the USA 800 billion dollars per year, plus,' Trump said in a late-night social media post ripping Powell ahead of his hearing. The president also called on his GOP lieutenants in Congress to pummel Powell for refusing to lower interest rates.
'I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come.' Several Republican lawmakers took Trump's memo and pressed Powell on why the central bank has yet to lower interest rates this year.
During a pointed questioning from Rep. Bill Huizenga, R-Mich., Powell continued to reiterate that Trump's tariffs have prompted uncertainty over rising inflation. 'The reason we're not is the forecast by all professional forecasters that I know of on the outside and the Fed do expect a meaningful increase in inflation over the course of this year,' he said.
The central bank chairman also conceded that tariffs may not push inflation up to forecasted levels. In that case, the Fed would move to quickly reduce rates, Powell testified. A drastic increase in unemployment could also prompt the bank to lower borrowing costs, he said.
'Do you believe we are in a position where we may be able to cut rates in July?' Lawler asked. Powell responded: 'If it turns out that inflation pressures do remain contained, then we will get to a place where we cut rates sooner rather than later... I don't think we need to be in any rush,' he added.
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