WASHINGTON--U.S. Federal Reserve Chair Jerome Powell said on Tuesday the central bank needs more time to see if rising tariffs drive inflation higher before considering the interest rate cuts that President Donald Trump is demanding. "Increases in tariffs this year are likely to push up prices and weigh on economic activity," Powell said in testimony prepared for delivery this morning at a hearing before the House Financial Services Committee. "The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It is also possible that the inflationary effects could instead be more persistent. For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance." Following the release of Powell's testimony investors pared bets that the central bank might cut its policy interest rate as soon as the central bank's July meeting, and increased the perceived odds for a rate reduction in September, with another to follow later in the year. Powell's testimony, as is usually the case with his semiannual congressional appearances, largely tracks the central bank's most recent policy statement, approved last week. Fed officials voted unanimously at that meeting to hold the benchmark interest rate steady in the current 4.25% to 4.5% range, and gave no indication rate cuts were imminent. New economic projections released at the time showed officials at the median expect two quarter-point rate cuts by the end of the year, in line with current market pricing. In recent days two Fed governors, both Trump appointees, have said rates could fall as soon as the July meeting given inflation has not yet risen in response to tariffs, while two reserve bank presidents say they still worry inflation will intensify over the rest of the year. Trump, who appointed Powell as chair in his first term but is expected to replace him when his term ends next spring, has repeatedly called for steep rate cuts. "We should be at least two to three points lower," he said in a social media post ahead of the hearing, adding in reference to Powell that he hoped "Congress really works this very dumb, hardheaded person, over."
