WASHINGTON — During a session on Wednesday, Jerome Powell, the Chair of the Federal Reserve, made it clear that the central bank will not adjust its interest rate strategies in response to President Donald Trump’s requests for lower rates.
Powell assured members of the House Financial Services Committee that the Federal Reserve would remain focused on its economic assessments when making decisions. He stated, “People can be confident that we’ll continue to keep our heads down, do our work, and make our decisions based on what’s happening in the economy.” This remark was part of his testimony which marked the second day of a semiannual review with Congress.
Earlier in the day, Trump expressed on social media his belief that “Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!” However, Powell previously indicated, during a press conference, that after three key rate reductions in the latter part of 2022, the Fed is hesitant to implement further cuts until there are clear signals that inflation is approaching its 2% goal.
Additionally, many officials at the Fed prefer to assess the impact of Trump’s policies—specifically the tariffs he has introduced and proposed—on the overall economy. Concerns are growing among economists who warn that tariffs could lead to a temporary increase in inflation.
Recent government data highlights a rise in inflation, with consumer prices increasing by 3% in January compared to the same month the previous year, marking a rise from a three-and-a-half-year low of 2.4% recorded in September. This recent uptick diminishes the likelihood of the Fed making further cuts to its key interest rate in the near future. The rates determined by the Fed are significant as they affect borrowing costs for various economic sectors, including mortgages, car loans, and credit card payments.
Powell stated that the Fed has made substantial progress toward modulating inflation but acknowledged that they have not yet reached the 2% target. He commented, “Today’s inflation print … says the same thing.” As a consequence, Powell noted that the Fed intends to maintain its current restrictive monetary policy for the time being. He emphasized that the existing interest rates are serving to curb borrowing and spending by both consumers and businesses.
After reducing its key rate from 5.3% to approximately 4.3% last year, the Fed initially projected two more cuts for this year. However, some economists now predict that the Fed might hold steady throughout the remainder of the year, while investors on Wall Street anticipate only a single cut, expected in October.
