Powell says Fed would have cut rates if not for tariffs

Federal Reserve Chairman Jerome Powell stated that interest rate cuts were on hold due to tariff effects, despite pressure from the Trump administration. At a European Central Bank forum, Powell said, “I think that’s right,” when asked if tariffs delayed cuts, explaining, “We went on hold when we saw the size of the tariffs. All inflation forecasts for the United States went up materially as a consequence… We’re simply taking some time.”

While he did not rule out a rate cut in July, Powell emphasized decisions will depend on evolving data: “We are going meeting by meeting. I wouldn’t take any meeting off the table or put it directly on the table.” Reuters noted short-term futures now show a roughly one-in-four chance of a rate cut in July, with CME FedWatch estimating chances of a rate cut at 21.2%, slightly higher than yesterday.

He stated that although the current debt level in the United States is sustainable, the country’s long-term fiscal trajectory is not. He emphasized the need to address this issue sooner rather than later.

He concurred with other Federal Reserve members that, provided inflation remains stable, it may be possible to reduce rates later in the year. He noted that the majority of FOMC participants anticipate it will become appropriate to begin lowering rates if data, particularly regarding inflation and the labor market, support such a move. The decision will be monitored closely based on economic indicators. A majority believe that one or more of the remaining four meetings this year could present an opportunity for rate reductions.