Forex Factory: Powell Warns of Inflation Amid Tariff Tensions
As the Fed weighs its options, Powell's comments suggest that the central bank is taking a cautious approach to monetary policy, prioritizing stability and inflation control over short-term political pressure. The impact of Trump's tariffs on inflation and the economy will be a key factor in the Fed's decision-making process.
Federal Reserve Chair Jerome Powell warned that President Donald Trump's tariffs will likely push up inflation in the coming months, despite criticism from some Republican senators who accused him of bias against the duties. Consumers will likely have to shoulder some of the cost of the import taxes, and the central bank wants to wait and see how inflation changes in the months ahead.
Most Fed officials support cutting rates this year, but the central bank is hesitant to do so due to concerns about inflation. The Fed has kept interest rates steady due to trade policy uncertainty, and inflation may rise this summer. While Powell did not rule out a rate cut in July, he said the Fed will assess the inflationary impact of Trump's tariffs before making a decision.
Powell emphasized the importance of the central bank's independence, saying it must remain "non-political" amid pressure from President Donald Trump to cut interest rates. The Fed chair's term ends in May 2026, and Trump has said he has candidates in mind to replace him. Powell stated that the Fed is focused on economic stability for everyone, not just a select group, and that it will not be swayed by political pressure.
The Fed's decision on interest rates will be closely watched in the coming months, as the central bank navigates the complex landscape of trade policy and inflation. With the US economy facing uncertainty, Powell's commitment to the Fed's independence and stability will be crucial in maintaining confidence in the financial markets.