For weeks, President Donald Trump has pushed the Federal Reserve to lower its interest rates to produce lower borrowing costs.
And for weeks, Federal Reserve Chair Jerome Powell has resisted the calls for rate cuts, even amid name-calling and demands for his resignation.
This week, Powell took his message to Portugal where, speaking at a conference hosted by the European Central Bank, he reiterated his position that the Fed is leaving its key rate right where it is while waiting to see how U.S. tariff policies affect the economy.
Powell told the conference audience that U.S. inflation is “likely to pick up later this summer,” according to a report from The Associated Press, though he acknowledged that the timing and magnitude of any price increase from the duties is uncertain. But he said the Fed will keep rates on hold while it evaluates the impact of tariffs on the U.S. economy.
“As long as the economy is in solid shape, we think the prudent thing to do is to wait and see what those effects might be,” Powell said, referring to the sweeping duties Trump has imposed this year, according to the AP report.
The Fed chair also said that without tariffs, the Fed would probably be cutting its key rate right now. The central bank went “on hold” after it saw how large Trump’s proposed tariffs were, Powell said, and economists began forecasting higher inflation, the AP reported.
At the same time, Powell did not rule out a rate cut at the Fed’s next policy meeting July 29-30. “I wouldn’t take any meeting off the table or put it directly on the table,” Powell said. Most economists, however, expect the Fed won’t reduce rates until September at the earliest.
