Fed Chairman Powell: No Rush to Cut Interest Rates Amid Tariff Uncertainty

Federal Reserve Chairman Jerome Powell reiterated to lawmakers that the central bank is in no rush to cut interest rates as officials await further clarity on the economic impact of President Donald Trump’s tariffs. ‘The effects of the tariffs will depend, among other things, on their final level,’ Powell stated on Tuesday (June 24, 2025) in prepared remarks for Congress. ‘For now, we are in a good position to wait and learn more about the likely trajectory of the economy before examining any adjustments to our policy stance.’ The testimony before the House Financial Services Committee follows last week’s Fed decision to leave interest rates unchanged within a range of 4.25% – 4.5%. The central bank’s cautious approach has infuriated Trump, who has repeatedly called for lower rates, arguing that the Fed keeps borrowing costs high for the U.S. government by maintaining steady rates. Meanwhile, Powell and several other policymakers have pointed to increased economic uncertainty stemming from the administration’s enhanced use of tariffs and other policy changes to justify keeping rates steady for now. Many economists anticipate that tariffs could exert upward pressure on inflation and hit economic growth, though these projections come with significant uncertainty. Trump has often shifted on the specifics of his tariff policy, while the administration says it is working on trade agreements that could influence the nature and level of tariffs. ‘Expectations for this level, and thus for the related economic impacts, peaked in April and have since diminished,’ Powell noted in a statement largely echoing last week’s comments. ‘Nevertheless, this year’s tariff increases could push prices higher and weigh on economic activity.’ Powell added that the impact of tariffs on inflation could be short-lived or potentially more persistent. Avoiding the ultimate outcome ‘will depend on the magnitude of the tariff effects, how long it takes for them to fully pass through to prices, and ultimately on the anchoring of longer-term inflation expectations,’ he said. Economic data so far has shown limited impact from tariffs. Fed officials Christopher Waller and Michelle Bowman have highlighted this dynamic among other factors, suggesting the Fed could cut rates as early as its next meeting in July. Meanwhile, Powell described overall economic and labor market conditions as stable. He noted that inflation has significantly eased from its highs in mid-2022 but remains somewhat elevated above the Fed’s 2% target. Looking beyond the next year, most measures of longer-term expectations remain consistent with the Fed’s inflation target.