On June 24, 2025, the Chairman of the Federal Reserve, Jerome Powell, is set to attend a congressional hearing to explain the reasons behind the Fed’s decision to refrain from cutting interest rates. Powell has submitted the semi-annual monetary policy report to Congress. In his prepared testimony, he vaguely indicated that “policy changes continue to evolve.” He cited the uncertainty of the impact of tariffs on the economy as a reason for opposing rate cuts, stating that “we have the ability to continue waiting to further understand the potential trajectory of the economy before considering adjusting our policy stance.”
Powell noted that President Trump’s tariffs are bound to have a certain impact on the economy, but the specific extent of their impact remains to be seen. He mentioned that inflation effects could be short-lived, reflecting a one-time change in price levels, but could also be more enduring.
However, some Fed officials are explicitly supporting President Trump’s judgment, urging for a swift reduction in borrowing costs, arguing that the inflation triggered by tariffs may be “temporary” or just a one-time spike.
At the end of last year, the Fed lowered the key interest rate by one percentage point after maintaining it at a high level for over a year, reaching the highest level in 20 years. Since President Trump’s return to the White House in January, the Fed has kept the benchmark lending rate within the range of 4.25% to 4.5%, believing the need to observe how major policy changes by President Trump would affect economic data.
Although there were widespread expectations that tariffs would hike prices and ultimately weaken economic growth, there is still little evidence of such a scenario unfolding.
Vice Chair of the Fed, Michelle Bowman, stated on Monday that if inflation remains moderate, the Fed should start cutting rates in July. Other Fed officials, including Christopher Waller, expressed willingness to lower rates quickly if the data supports it.
Earlier this month, Powell mentioned that President Trump’s “radical” tariff policy has already begun to have chain reactions throughout the economy, indicating that the impact on consumer prices is a matter of “when,” not “if.”
Mark Zandi, Chief Economist at Moody’s, told CNN reporters, “I would be surprised if the Fed decides to cut rates again in July, as by then, the inflation rise will begin to show.”
President Trump criticized Powell on Tuesday morning on “Truth Social” for rejecting rate cuts, stating, “He will explain in Congress today why he refuses to cut rates… We will pay for his incompetence for many years to come.”
– This article is based on reporting from ABC.