Powell signals Fed to hold rates steady amid tariff uncertainty

June 25, 2025 (MLN): Federal Reserve Chair Jerome Powell reaffirmed the central bank’s cautious stance on monetary policy, stating that officials are prepared to keep interest rates steady until there is clearer evidence on how tariffs will impact inflation.

In his prepared remarks to the House Financial Services Committee and scheduled testimony before the Senate Banking Committee on Wednesday, Powell described the U.S. economy as strong and the labor market as near full employment, though he acknowledged that inflation remains above the Fed’s 2% target.

Powell said that policy changes, including tariffs imposed under President Donald Trump, continue to evolve and their effects on the economy remain uncertain, as per CNBC.

“The effects of tariffs will depend, among other things, on their ultimate level,” he said, emphasizing the Fed’s intention to wait for more data before making any policy adjustments.

His remarks come as President Trump has intensified his criticism of Powell, calling him a “very dumb, hardheaded person” in a post on Truth Social early Tuesday.

When asked if political pressure from the White House was affecting Fed policy, Powell dismissed the notion, saying, “They’re having no effects. We’re doing our jobs.”

Powell noted that inflation is projected to rise modestly, with the Fed’s preferred measure expected to reach 2.3% in May, while the core measure, which excludes food and energy, could edge up to 2.6%.

Both figures were slightly lower in April.

He stated that the Federal Open Market Committee (FOMC) remains focused on keeping long-term inflation expectations anchored and avoiding a one-time price increase turning into sustained inflation.

While the FOMC voted unanimously last week to hold interest rates steady, the “dot plot” of future projections revealed a division among members.

Nine of the 19 officials favored either zero or one rate cut in 2025, eight expected two cuts, and two projected three.

Meanwhile, two FOMC voters, Governors Michelle Bowman and Christopher Waller, recently said they would support a rate cut in July if inflation remains under control.

The consumer price index rose just 0.1% in May, aligning with other data showing limited inflationary impact from tariffs so far.

According to the CME Group’s FedWatch tool, futures markets are pricing in only a 23% chance of a rate cut at the Fed’s July 29–30 meeting, with a significantly higher probability for a reduction in September.