Trump’s Tariff Talk vs. Fed’s Patience: Powell Defends Rate Hold

Federal Reserve Chair Jerome Powell is defending the central bank’s decision to maintain interest rates, emphasizing a patient approach to assess the full impact of tariffs on US prices. This stance comes in direct defiance of renewed public demands and sharp criticism from Donald Trump, who has consistently called for rate cuts to accelerate economic growth.
In an overnight social media post, Trump launched another attack on Powell, branding him “very dumb” and attributing long-term economic harm to the Fed’s refusal to lower rates since December. Trump asserted that this inaction, partly a consequence of his own administration’s shifting economic strategies, amounted to “incompetence.” Powell, however, reiterated the Fed’s commitment to managing inflation expectations.
During his testimony on Capitol Hill, Powell acknowledged the “likely” increase in prices due to Trump’s tariffs, which could complicate the Fed’s efforts to curb inflation. He pointed out the fluid nature of the administration’s policies, stating that their economic repercussions are still uncertain. The Fed chair noted that expectations regarding the scale of tariffs and their economic effects peaked in April before decreasing.
Powell stressed that the central bank’s primary “obligation” is to ensure long-term inflation expectations remain stable and prevent temporary price increases from becoming entrenched. He concluded that the Fed is currently well-positioned to observe economic developments further before considering any policy adjustments, despite signaling potential future rate cuts at their recent meeting.