June 24 (UPI) — U.S. Federal Reserve Chair Jerome Powell on Tuesday echoed recent economic sentiments to a congressional panel following the central bank’s decision to maintain its key interest rate for the fourth straight meeting despite public pressure from the White House.
Powell, who will likewise sit before lawmakers Wednesday at a Senate Banking Committee hearing, reiterated to the House Financial Services Committee that the Fed will wait to asses the impact of Trump’s sweeping tariffs on inflation before it seeks to lower interest rates and ignored mounting political pressure from U.S. President Donald Trump.
“For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” the chair said in his testimony.
He added inflation remains over the Fed’s 2% target and that the president’s tariff policies are likely to drive up consumer prices and “weigh on economic activity,” and noted that it’s unclear if tariff effects will reflect a “one-time shift in the price level” or something “more persistent.”
Historically, tariffs result in a one-time price spike and on occasion have resulted in long-term inflation.
“Policy changes continue to evolve, and their effects on the economy remain uncertain,” said Powell. “The effects of tariffs will depend, among other things, on their ultimate level.”
Interest rates instead remain in the 4.25% to 4.5% range after the rate-setting Federal Open Market Committee voted unanimously last week to hold the line.
In February, Powell told a Senate panel that the Fed was in no hurry to adjust its monetary policy as it marched towards its 2% goal of annual price growth.
On Tuesday, Powell told members that the Federal Reserve intends to balance its dual role to see low inflation and full employment “keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans.”
Powell expressed in his remarks that the economy is currently “in a solid position” but the 12-member Federal Open Market Committee is still in no rush to switch its policy until it weighs further data spelling out how tariffs will hit the economy.
“The FOMC’s obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem,” he said.
The FOMC maintained interest rates in December following November’s presidential election after it cut rates in three consecutive meetings prior.
Trump was critical of the Federal Reserve for not lowering interest rates but later said it was “the right thing to do.”
The economy showed signs of muted price pressure from tariffs so far after the consumer price index rose in May around 0.1%.
But according to the CME Group’s FedWatch gauge, there’s a 23% probability of a cut at the central bank’s July 29 meeting with a higher chance in September.
Meanwhile, Fed Governors Michelle Bowman and Christopher Waller indicated in recent days that they would favor an interest rate reduction in July but only if inflationary data was stable.