Fed’s Forward Look: Powell Eyes Tariffs for Future Rate Guidance

The Federal Reserve is taking a forward look, with Chair Jerome Powell specifically eyeing tariffs as a key factor for future interest rate guidance. Powell insists the central bank needs to see how tariffs affect US prices before considering rate cuts, directly contradicting Donald Trump’s demands for immediate economic stimulus.
Trump, in a recent social media post, unleashed another personal attack on Powell, calling him “very dumb” and accusing the Fed of “incompetence” for not cutting rates since December. He argued that this inaction, partly due to his own administration’s erratic economic policies, would lead to long-term economic harm. Powell, however, remains focused on the Fed’s independent mandate.
During his testimony on Capitol Hill, Powell reiterated that Trump’s tariffs are “likely” to increase prices, potentially making it harder for the Fed to achieve its inflation targets. He pointed out the frequent shifts in the administration’s policies and the resulting uncertainty regarding their economic impact. Powell noted that expectations for tariff levels and their economic effects peaked in April and have since receded.
Powell stressed the central bank’s “obligation” to ensure long-term inflation expectations remain stable and prevent temporary price increases from escalating into a persistent inflation problem. He concluded that the Fed is currently “well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”