Washington (AP) In direct opposition to President Donald Trump’s demands for quick cuts, Chair Jerome Powell stated Tuesday that the Federal Reserve will continue to wait and observe how the economy develops before determining whether to lower its benchmark interest rate.
According to Powell’s prepared remarks, which he will deliver early Tuesday before the House Financial Services Committee, “for the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”
Trump has asked the Fed to lower borrowing costs, so Powell is in for two days of potentially difficult questioning on Capitol Hill. Powell has frequently been greeted favorably or at least with little criticism by the House and Senate committees that monitor the Fed. Powell has also frequently pointed to his congressional backing as a safeguard against Trump’s attacks, but given the president’s continuous attacks, that support may start to decline.
Early on Tuesday morning, Trump retaliated once more, writing on his social media platform: “I hope Congress really works this very dumb, hardheaded person over.” His ineptitude will cost us dearly for many years to come.
Rep. French Hill, a Republican from Arkansas who chairs the committee, encouraged Powell to make sure inflation returned to the Fed’s target of 2%, which usually means maintaining high rates, at Powell’s most recent appearance before Congress in February.
The chair of the Fed’s 19-member interest rate-setting committee makes the decision to lower or increase borrowing costs. Usually, they decrease rates when the economy is sluggish to encourage borrowing and spending, and they raise rates to cool the economy to combat or prevent inflation.
Although the Fed also issued projections of future rate reduction that showed growing disagreements among the policymakers, the Fed’s committee unanimously decided last week to maintain its benchmark rate at its current level. Ten predicted at least two rate decreases this year, two only one, and seven predicted no rate cuts at all.
Powell stated at a press conference last week that before determining whether to lower interest rates, the Fed would wait to see how the economy develops over the course of the summer in reaction to Trump’s tariffs and other initiatives. According to his remarks, a rate cut wouldn’t happen until September.
However, since then, two prominent Fed governing board members, Christopher Waller and Michelle Bowman, have indicated the central bank may lower its rate as early as its July meeting. Trump picked both executives during his first term, and Waller is frequently floated as Powell’s successor when his term concludes in May.
Late last year, the Fed lowered interest rates three times to roughly 4.3%. However, since then, it has paused rate decreases due to worries that Trump’s tariffs may increase inflation. In addition to a 30% tax on Chinese goods, a 50% tax on steel and aluminum, and a 25% tax on automobiles, the president has imposed a 10% charge on all imports.
Nevertheless, despite considerable apprehension among economists over the effects of tariffs, inflation has gradually decreased this year. The government reported this week that the consumer price index increased by just 0.1% from April to May, indicating that price pressures are not as strong as they may be.
The cost of several services, like hotels and airfare, decreased last month, negating any tariff impact, while the price of other items increased. Prices increased 2.4% in May compared to 2.3% in April compared to the same month last year.
