Federal Reserve Chair Jerome Powell signaled that the central bank’s long-awaited interest rate cuts may remain on pause, citing concerns that tariffs could reignite inflation pressures in the coming months.
Speaking at a European Central Bank forum on Tuesday, Powell said recent tariff actions have raised inflation forecasts significantly, pushing the Fed into wait-and-see mode. “In effect, we went on hold when we saw the size of the tariffs,” Powell said. “As long as the U.S. economy remains solid, we think the prudent thing to do is to wait and learn more.”
Although inflation has yet to spike, Powell noted that officials expect upward pressure to build through the summer as businesses begin passing on the cost of import taxes to consumers. Economists broadly agree, warning that the full impact of the tariffs is likely still working its way through the system.
The Fed last lowered rates in late 2024 and has held them steady in the 4.25% to 4.5% range through the first half of 2025. Some policymakers have floated the possibility of cuts as early as the next meeting on July 30. But Powell remained noncommittal, saying the decision will hinge entirely on incoming data.
“I wouldn’t take any meeting off the table or put it directly on the table,” he said. “It’s going to depend on how the data evolves.”
The Fed’s cautious stance has faced sharp criticism from political leaders, including President Donald Trump, who has pressed for faster cuts. Still, Powell and his colleagues remain focused on economic fundamentals—particularly inflation expectations and consumer behavior—as they navigate an increasingly complex policy environment shaped by trade tensions.
