By Sama Marwan,
U.S. Federal Reserve Chair Jerome Powell said on Tuesday that the central bank would have eased its monetary policy by cutting interest rates by now, if it weren’t for President Donald Trump’s announcement of higher tariffs on exports from many countries around the world.
Responding to a question during a forum in Portugal about whether the Fed would have lowered interest rates again this year were it not for Trump’s controversial plan to increase tariffs announced earlier in the year, Powell said: “I think that’s true,” according to U.S. network CNBC.
Speaking at a forum organized by the European Central Bank in Sintra, Portugal, Powell added: “In fact, we halted the path of rate cuts when we saw the magnitude of the tariffs. Essentially, all inflation expectations in the United States rose significantly as a result of these tariffs.”
Powell reiterated that the central bank plans to “wait and learn more” about the impact of the tariffs on inflation before deciding to cut interest rates, once again ignoring President Trump’s calls for an immediate and significant rate reduction.
“We’re simply being patient,” Powell said, one day after Trump sent him a handwritten note pointing out how low interest rates are in other countries’ central banks and urging the U.S. to take action.
Powell continued: “As long as the U.S. economy is in good shape, we think the prudent thing to do is to wait and learn more about those potential effects (of the tariffs on inflation).”
In response to a question about Trump’s repeated verbal attacks on him, Powell said the Fed’s focus is “100% on inflation and employment,” a statement that drew applause from attendees at the ECB-hosted conference, as well as from his colleagues on stage from the European Central Bank, the Bank of England, and other central banks.
Central bank independence in setting interest rates without interference from elected politicians is seen as crucial to maintaining control over inflation.
Meanwhile, Powell noted that the majority of Fed officials, according to the latest forecasts, still expect to cut the benchmark interest rate later this year, emphasizing that he is not ruling out any of the four remaining Fed meetings this year. The Fed’s next meeting is scheduled for July 29-30.
The Fed is set to receive the latest U.S. labor market data for June this coming Thursday, with economists expecting a slowdown in job growth. New inflation data will follow in two weeks, while July 9 is the potential deadline for the imposition of higher global tariffs.
Market reactions to Powell’s statements highlighted the dilemma the Fed faces in balancing intense geopolitical risks and mixed economic data.
Investors’ expectations of a rate cut in July rose to about one in four after Powell did not explicitly rule out that possibility, but those odds fell again to roughly one in five following unexpectedly strong U.S. job openings data.
