Fed’s Tariff Watch: Powell Defies Trump’s Demands for Rate Cuts

The Federal Reserve, under the leadership of Chair Jerome Powell, is maintaining a watchful stance on tariffs, defying direct demands from Donald Trump to cut interest rates. Powell argues that the central bank needs to assess the full impact of these tariffs on US prices before adjusting its monetary policy. Trump, critical of the Fed’s independence, continues to push for lower rates to boost economic growth.
In a sharp overnight social media attack, Trump labeled Powell “very dumb” and blamed the Fed’s “incompetence” for not reducing rates since December. He asserted that this inaction, partially due to the instability of his own administration’s economic policies, would lead to lasting economic harm. Powell, however, remains focused on the Fed’s core mission of price stability.
During his testimony on Capitol Hill, Powell reiterated that Trump’s tariffs are “likely” to drive up prices, which could complicate the Fed’s efforts to control inflation. He acknowledged the frequent changes in the administration’s policies and the resulting uncertainty regarding their economic impact. Powell noted that expectations for tariff levels and their economic effects peaked in April and have since decreased.
Powell stressed the importance of the Fed’s “obligation” to keep long-term inflation expectations stable and prevent any temporary price increases from becoming a sustained inflationary problem. He affirmed that the central bank is currently well-positioned to wait for more information on the economic trajectory before considering any policy changes, despite signaling potential future rate cuts.