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Tariffs

Fed Chair Jerome Powell Defies Trump's Pressure to Cut Rates

Strategic Insights

— 2 min read

Federal Reserve Chair Jerome Powell held firm against President Trump's pressure to lower interest rates, saying the central bank will wait to see how the economy is affected by the tariffs imposed by the White House. Speaking in Sintra, Portugal, Powell stated that the Fed's key rate will remain on hold while the bank evaluates the impact of tariffs on the US economy. Despite criticism from the White House, Powell acknowledged that the Fed might consider a rate cut in the future, but only after assessing the effects of tariffs.

Powell's comments highlighted the ongoing tension between the Fed and the Trump administration, with the President repeatedly urging the Fed to cut rates to boost the economy and lower borrowing costs. However, economists have warned that a rate cut might not have the desired effect, as the Fed's key rate influences other interest rates, but the markets also play a significant role in determining borrowing costs.

Key Takeaways:

  • The Federal Reserve will keep its key rate on hold while evaluating the impact of tariffs on the US economy.
  • President Trump has been critical of the Fed, urging it to cut its key rate to boost the economy and lower borrowing costs.
  • Most economists expect the Fed to keep rates unchanged until September at the earliest.
  • Powell acknowledged that the Fed might consider a rate cut in the future, but only after assessing the effects of tariffs.
  • The Fed has kept its key short-term interest rate unchanged this year, at about 4.3 per cent, after cutting it three times in 2024.
  • Trump's criticism of the Fed has threatened the institution's traditional independence from politics.
  • Powell's term as Fed Chair ends in May 2026, and he has said that his main priority is to deliver an economy with price stability, maximum employment, and financial stability.

Statistics:

  • The Fed's key rate has remained unchanged this year at about 4.3 per cent.
  • The Fed has cut its key interest rate three times in 2024.
  • The 10-year Treasury yield has risen despite the Powell Fed's rate cuts, lifting mortgage rates and other borrowing costs.
  • Powell's term as Fed Chair ends in May 2026.
  • The unemployment rate in the US has remained low, at around 3.6 per cent.
  • The inflation rate is expected to pick up later this summer due to the impact of tariffs.

Sources:

  • The Associated Press (no publication date mentioned)
  • Federal Reserve Chair Jerome Powell (no publication date mentioned)
  • European Central Bank (no publication date mentioned)

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