Powell: It's very conditional to wait and consider interest rate actions again

Powell reiterates that there is no rush to cut interest rates, and the Federal Reserve is closely monitoring the specific impact of Trump's tariff policy on the economy.

On the 24th, Federal Reserve Chairman Powell told lawmakers that the final level of tariffs will determine their impact on the economy. He emphasized that the Federal Reserve is currently in a favorable position, able to be patient and consider adjusting its monetary policy stance only after having a clearer judgment on the economic direction.

In his prepared testimony for Congress, Powell mentioned that the increase in tariffs this year could raise prices and put pressure on economic activity. However, he also stated that the impact of tariffs on inflation could be temporary or more persistent. This depends on the magnitude of the tariff effects, the time required for transmission to prices, and whether long-term inflation expectations can remain stable.

"There is a good reason to wait a bit longer before considering interest rate actions."

Trump Exerts Pressure Again, Fed Insists on Independence

Before Powell's testimony before the House Financial Services Committee, the Federal Reserve had already decided last week to keep interest rates unchanged in the range of 4.25%-4.5%. This "wait-and-see" decision triggered Trump's dissatisfaction, as he repeatedly called for interest rate cuts and accused the Federal Reserve of maintaining high rates, which increased the borrowing costs for the U.S. government.

Earlier on Tuesday, Trump posted on social media, calling Powell a "stubborn" "too late" figure and hoped Congress would "fix him," predicting that he would pay a multi-year price for his "incompetence."

However, Powell and several other Federal Reserve decision-makers pointed out that the escalating tariff policies and other policy changes from the Trump administration have brought economic uncertainty, which is the reason for maintaining interest rates at their current level. Although many forecasts suggest that tariffs will raise inflation and suppress economic growth, these estimates carry significant uncertainty.

Limited Impact of Economic Data, Officials Show Disagreement

So far, economic data shows limited impact from tariffs. Federal Reserve Governor Christopher Waller and Michelle Bowman have argued that the Federal Reserve could cut rates as early as the next meeting in July for this reason.

Powell stated that although inflation has significantly retreated from its mid-2022 peak, it remains slightly above the Federal Reserve's 2% target. He added that most long-term expectation indicators remain aligned with the Federal Reserve's inflation target over the next year or so. Overall, Powell described the performance of the U.S. economy and labor market as robust.

According to the CME FedWatch indicator, futures market pricing shows that the likelihood of a rate cut at the meeting on July 29-30 is only 23%, while the likelihood of a rate cut in September is much higher.

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