Powell: Not Time to Cut Interest Rates Yet, Wait for Tariff Impact

 Federal Reserve (Fed) Governor Jerome Powell assured lawmakers that the US central bank would not lower interest rates in the near future, pending further clarity on the economic impact of Donald Trump's tariff policy.

“The impact of tariffs will depend, among other things, on how large the tariffs ultimately are,” Powell said in a statement prepared for delivery before Congress on Tuesday (June 24, 2025). “For now, we are in a good position to wait and see where the economy is headed before considering policy adjustments.”

Powell's statement was made during his testimony before the US House Financial Services Committee, shortly after the Fed's decision last week to keep its benchmark interest rate in the 4.25%–4.5% range.

The Fed's decision to hold rates steady drew criticism from Trump, who has long pushed for rate cuts and accused the Fed's policies of keeping US government borrowing costs high.

"The 'latecomer' Jerome Powell from the Fed will appear before Congress today to explain, among other things, why he refused to lower interest rates," Trump wrote on social media Tuesday morning. "I hope Congress really puts pressure on this stubborn and foolish man. We will suffer the consequences of his incompetence for years to come."

Powell and several Fed policymakers previously stated that economic uncertainty caused by the Trump administration’s increased use of tariffs and other policy changes was the main reason for their caution. Some analysts predict that tariffs could drive up inflation and suppress economic growth, though such projections remain shrouded in significant uncertainty.

Trump himself has frequently changed the details of his tariff policy, while the administration says it is finalizing trade deals that could affect the direction and magnitude of tariffs.

"Expectations regarding tariff levels—and their economic impact—peaked in April and have since begun to decline," Powell said in a statement that largely repeated his remarks from last week. "Nevertheless, this year's tariff increases are likely to continue to push up prices and weigh on economic activity."

He added that the impact of tariffs on inflation could be temporary, but also has the potential to persist longer.

Avoiding long-term impacts will depend heavily on "the magnitude of the tariff impact, how long it takes to fully feed through to prices, and most importantly, the ability to keep long-term inflation expectations stable," he said.

Economic data so far indicates limited impact from tariffs. Two Federal Reserve vice chairmen, Christopher Waller and Michelle Bowman, even assessed that this situation could allow for an interest rate cut as early as the Fed's July meeting.

Meanwhile, Powell described the overall economic and labor market conditions as still solid. He stated that inflation has declined significantly from its peak in mid-2022, though it remains slightly above the Fed's 2% target. Powell also added that most indicators of long-term inflation expectations remain aligned with the central bank's target.