The Federal Reserve is offering a measured response to Donald Trump’s attacks, with Chair Jerome Powell defending the decision to hold interest rates. Powell emphasized that the Fed is prioritizing an assessment of how tariffs will influence US prices before considering any adjustments to monetary policy.
Trump, in an overnight social media post, labeled the Fed chair as “very dumb” and attributed perceived economic damage to the central bank’s refusal to lower rates since December. He claimed that this inaction, partly stemming from the uncertainty created by his own administration’s economic strategies, would have long-lasting negative consequences for the US. Powell, however, maintains that the Fed’s “obligation” is to manage long-term inflation expectations.
During his appearance on Capitol Hill, Powell reiterated that Trump’s tariffs were “likely” to increase prices – potentially challenging the Fed’s years-long effort to bring down US inflation. He noted, however, that the administration’s policies frequently shift. “Policy changes continue to evolve, and their effects on the economy remain uncertain,” Powell told the US House of Representatives financial services committee.
Despite the potential inflationary pressures from tariffs, Powell stressed the Fed’s readiness to wait and gather more information before making any policy adjustments. At their recent meeting, Fed officials kept rates on hold but signaled a possibility of two cuts later this year, while also revising their inflation projections upwards and growth estimates downwards.
