Title: "Fed’s Jerome Powell Credits Tariffs for Holding Rates Steady as Trump Pushes for Cuts"
Recently, Federal Reserve Chair Jerome Powell revealed that if it weren’t for tariffs, the Fed would have already cut interest rates in 2025. He made this comment during a central bankers’ conference on Tuesday.
Tariffs and Interest Rate Decisions
In an onstage interview at the European Central Bank Forum, alongside central bankers from England, Korea, Japan, and the European Union, Powell was asked whether the market uncertainty generated by the White House’s ongoing tariff policies influenced the Fed’s decision to delay rate cuts. His response was clear: “I do think that.”
The Fed’s Position on Interest Rates
Since that point, the Fed has opted to remain cautious regarding any changes to interest rates. “We went on hold when we saw the size of the tariffs, and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” Powell explained. “So we didn’t overreact; in fact, we didn’t react at all.”
In late 2024, the Fed had initiated a series of interest rate cuts. However, that trend paused at the start of this year. At each Federal Open Market Committee (FOMC) meeting since then, Powell has maintained that the Fed would take a ‘wait and see’ approach due to the prevailing economic uncertainty. This uncertainty was further heightened when President Donald Trump announced his aggressive tariff policy in early April, which triggered a stock market downturn, caused bond yields to spike, and weakened the dollar, all of which led businesses to freeze their investment plans—something that could intensify the risk of a recession.
The Wait-and-See Strategy
“We think the prudent thing to do is to wait and learn more about the effects of these tariffs,” Powell stated. “And again, they haven’t really shown up. So for now—we’re waiting.”
Powell, Trump, and the Irony
Powell’s remarks highlight an ironic twist in the current U.S. economic landscape: the Fed’s pause on interest rate cuts stems from the growing uncertainty tied to Trump’s tariff policy, while Trump himself has expressed frustration with Powell for not lowering rates quickly enough. In fact, just this past Monday, the President took to social media to renew his criticism, posting a handwritten note that accused Powell of dragging his feet on rate cuts. As is customary, Powell declined to comment on Trump’s remarks during the ECB Forum.
Interestingly, while the Fed remains cautious, it’s clear that President Trump and Jerome Powell are at odds, making the economic atmosphere even more contentious.
A White House spokesperson has not yet responded to requests for comment.