Jerome Powell links interest rate decisions to Trump's tariffs
- In a recent panel discussion, Jerome Powell emphasized that inflation concerns driven by tariffs have been a primary reason for not cutting interest rates.
- He acknowledged that the Fed would likely have lowered rates this year if the tariffs had not influenced inflation forecasts.
- The ongoing pressures from President Trump and the Fed's cautious stance highlight the complexities of US monetary policy.
In Portugal, on July 2, 2025, Federal Reserve Chair Jerome Powell addressed the impact of tariffs on U.S. monetary policy during a panel discussion attended by global central bank leaders. He elaborated on the Federal Reserve's decision-making process regarding interest rates, revealing that concerns over inflation due to tariffs imposed by President Donald Trump have led the Federal Reserve to maintain current interest rates rather than implementing cuts. Powell highlighted that the Fed observed a significant upward shift in inflation forecasts following the tariffs, which in turn informed their cautious approach to rate adjustments. Despite Trump's ongoing pressure for rate cuts, Powell emphasized a prudent, wait-and-see stance as the economy remains stable with low unemployment. He noted that while the U.S. economy is in a solid position, the corresponding effects of the tariffs have yet to fully materialize, but could lead to higher inflation readings in the near future. Meanwhile, Trump has publicly criticized Powell, labeling him inadequate and expressing frustration over the Fed's reluctance to keep pace with the lower interest rates seen in other countries. These tensions illustrate the delicate balance between political pressure and the independence essential for the Federal Reserve's decision-making process, a balance Powell reinforced as crucial to maintaining financial stability for the country.