Key Insights
- Federal Reserve Chair Jerome Powell maintained the central bank's stance against lowering interest rates, despite pressure from President Trump, due to concerns about inflation resulting from U.S. tariffs.
- Powell emphasized that the Fed will wait and gather more data to assess the impact of tariffs on the economy before making policy adjustments.
- Consequently, borrowing costs for various types of debt could remain high, as the Fed aims to balance inflation control and economic growth.
- President Trump's demands for significant rate cuts have been met with resistance from the Fed, as Powell remains steadfast in his commitment to independent policymaking.
Jerome Powell Defends Fed's High Interest Rates amid Trump's Tariff Pressure
Central Bank Chief Powell Sticks to 'Observe-Before-Act' Strategy Regarding Interest Rate Adjustments
In a hearing before the House Committee on Financial Services, Federal Reserve Chair Jerome Powell clarified the Fed's position on maintaining high interest rates in light of President Trump's tariff policy demands.
Trump has repeatedly pushed for the Fed to slash interest rates sharply, pointing to recent economic data showing reasonable inflation levels. However, the Fed, an independent entity, is reluctant to make thatmove, with Fed officials concerned about the inflationary effects of Trump's tariffs.
Powell, in his June 24, 2025, testimony, argued that the Fed should hold off on cutting rates until it has a clearer understanding of the ultimate impact of tariffs on prices and consumer behavior. While he acknowledged that increases in tariffs would likely push up prices and slow economic growth, he emphasized that these effects might be temporary or more persistent, depending on several factors[1][3].
The Fed's deliberate approach to interest rates aims to avoid creating an ongoing inflation problem and ensures that any tariff-related price increases don't destabilize its efforts to keep inflation under control[1][2]. The Fed's policy stance aligns with its recent unanimous decision to keep the benchmark interest rate within the range of 4.25% to 4.5%, a position it has held since December 2024[1][3].
Trump's constant calls for rate cuts have been met with resistance from the Fed, with Chairman Powell remaining defiant in the face of political pressure. He prioritizes independent policymaking to maintain price stability and economic health over external demands to stimulate growth through lower interest rates[2][4].
Overall, Powell demonstrated a commitment to balancing the Fed's dual mandate of managing inflation and maintaining full employment amid the uncertainty brought about by tariffs and other economic pressures[1][3][4].
Short-term cautiousness appears to be the Fed's approach, with Powell emphasizing that the economy remains strong and further data is needed to determine whether inflation pressures persist or subside[1].
Owner of a small business that relies on borrowing for growth, take note: rate cuts may not come as quickly as Trump is demanding, so be prepared to navigate the current interest rate landscape.
tips@our website
References
[1] "Federal Reserve Chair Jerome Powell Defends High Interest Rates, Citing Risk of Inflation." CNBC, 24 June 2025, https://www.cnbc.com/2025/06/24/federal-reserve- chair-jerome-powell-testifies- on-high-interest-rates.html.
[2] "Powell Resists Trump's Demands to Lower Rates." The New York Times, 21 June 2025, https://www.nytimes.com/2025/06/21/business/ economics/powell-federal-reserve-interest-rates.html.
[3] "Trump's Tariffs Loom Over Outlook, Powell Says." Bloomberg, 24 June 2025, https://www.bloomberg.com/news/articles/2025-06-24/ trump-s-tariffs-loom-over-outlook-powell-says.
[4] "Trump Urges Congress to Challenge Powell over Interest Rates." Politico, 21 June 2025, https://www.politico.com/news/2025/06/21/trump-powell-congress- interest-rates-00051938.
- In the face of President Trump's calls for hastened interest rate cuts, Jerome Powell, the Federal Reserve Chair, maintains a cautious stance on trading finance, citing the need for a clearer understanding of tariff impacts on prices and consumer behavior.
- The ongoing political tension between Trump and the Fed, over rate adjustments, has implications for the ICO and general-news sectors, as the Fed's commitment to independent policymaking could influence the finance and business landscape.
- Small businesses relying on borrowing for growth should be aware of the potential delays in rate cuts, as the Fed aims to control inflation and maintain stable economic conditions despite increasing tariff pressures in politics, where demands for lower rates persist from Trump.
