Jerome Powell asserts the economy is strong amid rate cut discussions

On June 24, 2025, Federal Reserve Chair Jerome Powell testified before Congress, affirming that the U.S. economy continues to be in a solid position. The central bank has maintained its key interest rates at a range of 4.25% to 4.5% since January, resisting external pressure, particularly from President Trump, to lower rates in response to economic concerns. Powell emphasized the importance of waiting for more precise data regarding the implications of recent tariffs imposed by the Trump administration before making any adjustments to interest rates. The Fed seeks to avoid potential inflation stemming from these tariffs in the coming months. During his testimony, Powell expressed that it is too early to predict the effects of ongoing policy changes on the economy. He acknowledged the relatively low unemployment rates but noted that inflation was slightly above the Fed's 2% target, complicating the decision-making process. Powell pointed out that tariff-driven inflation may manifest itself as either transitory or persistent and that data expected in the near future would be critical in his assessment. This uncertainty has made the Fed cautious about lowering rates too soon. Several Fed officials, including Governors Michelle Bowman and Christopher Waller, have indicated they would favor considering rate cuts in response to inflation trends. However, Powell highlighted the importance of maintaining a balanced approach that doesn't overly react to temporary price shifts caused by tariffs, emphasizing that they don't factor in political pressures when setting monetary policy. He explained that the Fed must evaluate how tariffs will impact supply chains and consumer prices, acknowledging that the effects may not be immediately visible in economic data. Debate over the possibility of rate cuts has intensified, with many economists estimating a low probability of a July reduction. Powell's comments in testimony suggest a potential wait-and-see approach as the Fed monitors inflation data from upcoming months. He reiterated that the institution’s decisions would solely be based on economic data, reaffirming the independence of the Fed from political influence. The outcome of the inflation data over the summer may significantly influence future Fed actions regarding interest rates.