Jerome Powell Tells Congress Fed Is ‘Well Positioned To Wait’ On Rate Cuts Despite Mounting Pressure From Trump

Federal Reserve Chair Jerome Powell on Tuesday told Congress that the central bank is “well positioned to wait” as far as interest rate cuts are concerned, reiterating his previous stance.

“Increases in tariffs this year are likely to push up prices and weigh on economic activity,” Powell said during his testimony before the House Committee on Financial Services.

The Federal Open Market Committee (FOMC) kept interest rates unchanged last week, maintaining the key borrowing rate in the 4.25% to 4.5% range.

He added that the Fed will chalk out the adjustments needed to its rate policy once it learns more about the course of the economy. However, he stopped short of explaining how long it will take the central bank to take a call in this regard.

“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, in a clear sign that the Fed is continuing with its wait-and-watch approach.

However, Powell acknowledged that the central bank could cut rates sooner in case inflation does not heat up, or if the labor market weakens enough.

As for whether the Fed would cut rates twice this year, Powell did not make a commitment.

“What will happen with rates is dependent on the economy, and that is highly uncertain,” he said.

This comes after President Trump lashed out at Powell again on Tuesday ahead of the Fed Chair’s testimony in Congress.

“I hope Congress really works this very dumb, hardheaded person,” the President said in a post on Truth Social.

The FOMC’s projections point to stagflationary pressures on the economy, with inflation expected to reach 3% in 2025, while the gross domestic product (GDP) is projected to grow at just 1.4%.

Earlier in the day, Atlanta Federal Reserve President Raphael Bostic also reiterated his stance on rate cuts, calling for patience to see how businesses adjust to President Trump’s tariff policies.

Bostic said the job market is stable and inflation remains a risk, aligning with Powell’s assertion that uncertainty about the economic outlook has “diminished but remains elevated.”

He added that businesses could begin passing on the increased cost of inputs to consumers later this year, resulting from inflationary pressures caused by Trump’s tariffs.

However, Federal Reserve Governors Christopher Waller and Michelle Bowman took a contrary stance, citing labor market weakness as the primary reason for their expectation of a cut in July.

“If you’re starting to worry about the downside risk labor market move now don’t wait. Why do we want to wait until we actually see a crash before we start cutting rates?” Waller said.

Meanwhile, U.S. equity markets surged on Tuesday amid signs of Israel and Iran de-escalating tensions in their 12-day war, despite reports of violations.

At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.97%, while the Invesco QQQ Trust (QQQ) gained 1.4%. Stocktwits data shows the retail sentiment around the S&P 500 ETF has been in the ‘extremely bearish’ territory over the past week.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Also See: Trump Says China Can Continue Buying Oil From Iran, Pushing Prices Lower Amid De-Escalating Israel-Iran Tensions