If it were not for tariffs, the Federal Reserve would have reduced interest rates in 2025, Chairman Jerome Powell said on Tuesday at a Central Banker conference.
During an interview on the stage in the European Central Bank Forum next to the central bankers from England, Korea, Japan and the European Union, Powell was asked whether the uncertainty caused by the persistent tariff regime of the White House caused the Fed to reduce interest rates. He replied: “I think that.”
Since then, the FED has been committed to making decisions about interest rates. “We went to the queue when we saw the size of the tariffs and where and essentially all inflation forecasts for the United States have increased significantly as a result of the tariffs,” said Powell. “So we didn’t overreact. In fact, we didn’t react at all.”
The FED had closed in 2024 with a number of interest reductions. However, it held during the break that at the beginning of this year in the rates of the cut cycle. Since then, Powell has repeated the view at every FOMC meeting that the Fed would wait with the economic prospects to see what happened before lowering interest. The rampant uncertainty, which had affected all market participants, not only the Fed began when President Donald Trump announced his widespread and hard tariff policy in early April. The new politics led to a stock market crash, led to the income yields increasing and the dollar were weaker. It also forced companies to hold a stop pattern for future investment plans that risk reinforcement of a recession.
“We think that what to do is to wait and learn more and see what these effects could be,” said Powell. “And again they didn’t really appear. So currently – we are waiting.”
Powell’s comments indicate a certain irony in the current situation of the US economy. The break in interest rate cuts was due to the increased level of uncertainty that is due to Trump’s tariff policy. At the same time, Trump is angry with Powell because he did not lower the interest rates. On Monday, the President renewed his attacks on Powell and published a picture of a handwritten note that accused him of reducing too long. In the ECB forum, Powell once again rejected the answering of questions about Trump’s comments, his typical answer when asked.
A spokesman for the White House did not immediately answer a request for comments.
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