Powell says Fed rate cut is on hold even as Trump demands cuts

Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve in Washington, Wednesday, June 18, 2025. (AP Photo/Mark Schiefelbein)

WASHINGTON — The U.S. Federal Reserve will continue to wait and see how the economy evolves before deciding whether to reduce its key interest rate, Chair Jerome Powell said Tuesday, a stance directly at odds with President Donald Trump’s calls for immediate cuts.

“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 testimony Tuesday before the House Financial Services Committee.

Several Republicans on the committee pushed Powell to consider reducing borrowing costs more quickly, as soon as its next meeting at the end of July. But on the whole, the hearing was uniformly polite and Powell did not face sharp criticism over the Fed’s decision to leave its rate unchanged.

Members of both parties thanked Powell for maintaining his focus on the Fed’s dual mission of controlling inflation and supporting maximum employment. Powell has often cited his support in Congress as a bulwark against Trump’s attacks.

Trump lashed out again early Tuesday, posting on his social media site: “I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come.”

Several Republicans asked Powell why the central bank has yet to lower borrowing costs. Powell responded that most economists, inside and outside the Fed, still expect tariffs to push inflation higher, and Fed policymakers want to see what happens over the next couple of months before making any changes.

“We do expect tariff inflation to show up more,” Powell said. “We really don’t know how much of that’s going to be passed through the consumer. We have to wait and see.”

Under questioning, Powell acknowledged that tariffs might not push up inflation as much as economists forecast. That, he said, could lead the Fed to reduce rates more quickly. A sharp rise in the unemployment rate could also spur the Fed to cut borrowing costs more quickly, he said.

“We could see inflation come in not as strong as we expect,” he said. “And if that were the case, that would tend to suggest cutting sooner.” But when asked specifically about July, Powell declined to comment.

Powell also said he expected to see tariffs’ impact on prices emerge in the next few months, starting in June. The June inflation report will be released July 15.

Rep. Josh Gottheimer, a Democrat from New Jersey, asked Powell whether Trump’s “bullying” would impact the Fed’s decision-making.

Powell said the Fed wants to “deliver a good economy for the benefit of the American people, and that’s it.”

“Anything else is kind of a distraction,” Powell added. “We always do what we think is the right thing to do, and we live with the consequences. I don’t know how else to do the job.”

The Fed’s 19-member interest rate setting committee, led by the chair, decides whether to cut or raise borrowing costs. They typically increase rates to cool the economy to fight or prevent inflation, and lower rates when the economy is weak to boost borrowing and spending.

The Fed’s committee voted unanimously last week to keep its key rate unchanged, though the Fed also released forecasts of future rate cuts that revealed emerging divisions among the policymakers. Seven projected no rate cuts at all this year, two just one, while 10 forecast at least two reductions.

The Fed chair said the bump to inflation from tariffs could be temporary, or it could lead to a more persistent bout of inflation.

The Fed’s “obligation,” Powell said, “is ... to prevent a one-time increase in the price level from becoming an ongoing inflation problem.”

At a news conference last week, Powell suggested the Fed would monitor how the economy evolves over the summer in response to Trump’s tariffs, hinting that a rate cut wouldn’t occur until September.

Yet two high-profile members of the Fed’s governing board, Michelle Bowman and Christopher Waller, have since suggested the central bank could cut its rate as early as July. Both officials were appointed by Trump during his first term and Waller is often mentioned as a potential replacement for Powell when his term ends next May. Powell was also appointed by Trump in late 2017.

Other officials, however, are still cautious about rate reductions. Beth Hammack, president of the Federal Reserve’s Cleveland branch, said Tuesday that given the uncertainty enveloping the economy, rates may be on hold for “quite some time” before the Fed decides to make “very modest cuts.”

Trump is urging the Fed to cut rates to save the U.S. government money on interest payments affixed to the vast national debt. Yet the Fed has long resisted consideration of the government’s financing costs when making interest rate decisions, preferring instead to focus on the health of the economy and inflation..

Waller, in an interview Friday, said that lowering the government’s borrowing costs is “not our job” and added that it was up to Congress and the White House to reduce the budget deficit.

Trump meanwhile, on social media Tuesday repeated his false claim that the European Central Bank has cut its key rate ten times while the Fed has not cut at all. In fact, in the last 12 months the ECB has reduced its rate eight times and the Fed has done so three times, all late last year.

The Fed’s cuts last year lowered its rate to about 4.3 per cent. Since then it has put reductions on pause out of concern that Trump’s tariffs lead to inflation. The president has slapped a 10 per cent duty on all imports, along with an additional 30 per cent levy on goods from China, 50 per cent on steel and aluminum, and 25 per cent on autos.

Yet inflation has steadily cooled this year despite widespread concerns among economists about the impact of tariffs. The consumer price index ticked up just 0.1 per cent from April to May, the government said last week, a sign that price pressures are muted.

Chris Rugaber, The Associated Press