FEDERAL Reserve Chair Jerome Powell told Congress on Tuesday that the central bank will not rush to cut interest rates, despite mounting pressure from President Donald Trump and growing uncertainty over the administration’s evolving tariff policies.

Instead, Powell signalled a cautious “wait and see” approach, warning that the inflationary impact of new tariffs remains unclear and could be more persistent than markets expect.

Tariffs take centre stage

Testifying before the Republican-led House Financial Services Committee, Powell made it clear that the Fed’s policy is not an endorsement or criticism of Trump’s trade agenda. “We aren’t commenting on tariffs,” Powell said. “Our job is keeping inflation under control, and when policies have short- and medium-term, meaningful, implications, then inflation becomes our job.”

The central bank’s latest decision left its benchmark interest rate unchanged at 4.25 per cent to 4.5 per cent, with no indication of an imminent cut. The move comes as Trump has repeatedly demanded steep reductions — claiming rates should be “two to three points lower” — and as a July 9 deadline looms for higher tariffs on a broad range of imports.

Inflation in focus

Powell’s testimony highlighted the Fed’s central dilemma: while the US economy remains in a “solid position” with low unemployment and inflation well below its pandemic-era peak, the full effect of new tariffs on consumer prices and economic growth remains uncertain.

“Increases in tariffs this year are likely to push up prices and weigh on economic activity,” Powell told lawmakers. “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.”

He added, “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.”

Divided views within the Fed

While some Fed governors, including Trump appointees, have floated the possibility of a rate cut as soon as July if inflation remains subdued, others remain wary. Most professional forecasters, Powell noted, expect a “meaningful increase in inflation over the course of this year” as tariffs bite.

Markets have responded by pushing back expectations for a rate cut to September, with another likely by year-end, in line with the Fed’s latest projections.

Political tensions, policy prudence

Trump’s public criticism of Powell has grown increasingly sharp ahead of the hearing, but Powell has maintained bipartisan support in Congress for his measured, data-driven approach. Powell’s term as chair runs through May 2026, and with President Trump now back in office, he is widely expected to nominate a replacement when Powell’s term expires. For now, Powell’s message is clear: the Fed will not be swayed by political pressure or speculation. “Policy changes continue to evolve, and their effects on the economy remain uncertain,” he said.

With the outcome of Trump’s trade policy still in flux, and the inflation outlook clouded by tariff risks, the Fed’s next moves will depend on how the data unfold in the coming months. For investors, businesses, and policymakers alike, the message from the Fed is one of patience and prudence — at least for now.