Powell Warns Tariffs May Raise Inflation, Cloud Fed Outlook
Federal Reserve Chair Jerome Powell informed U.S. senators during a Wednesday hearing that Trump administration tariffs would increase inflation rates starting this summer which would make interest rate decisions more complicated for the central bank.
During his Senate Banking Committee appearance Powell repeated that the Fed will not lower interest rates until it observes more defined inflation patterns. The inflation expectations he expressed during his House testimony on Tuesday matched his Senate testimony when he predicted consumer prices would reflect import cost increases starting with June and July data.
Powell stated that the Fed would consider rate reductions if inflation stays under control. “But we’re not in a rush.”
The Federal Reserve maintained its interest rates between 4.25% and 4.5% since December despite Trump's demands for immediate rate reductions. The internal projections indicate a divided perspective among officials because seven out of 19 members predict no interest rate cuts in 2025 but ten members forecast at least two cuts.
The upcoming July 9 tariff deadline creates a challenging situation for the Federal Reserve. The market predicts Federal Reserve rate reductions in September and December based on the assumption that inflation will not rise.
The central bank faces increased pressure from President Trump who has criticized Powell's leadership while suggesting potential replacements before Powell's term ends in 2026.
Dominic Maley is an American journalist recognized for his sharp and insightful reporting on social and political issues. His work is known for its depth, integrity, and the ability to highlight critical societal concerns.