Fed Chair Powell Holds Off on Rate Cut Despite Trump's Demands

The Federal Reserve, led by Chair Jerome Powell, is taking a cautious approach in deciding whether to reduce its key interest rate. This stance is in contrast to President Donald Trump's calls for immediate cuts. Powell emphasized the need to wait and gather more information about the economy before making any policy adjustments during his testimony before the House Financial Services Committee. While some lawmakers urged quicker rate cuts, the overall tone of the hearing was respectful.

Powell reiterated the Fed's commitment to managing inflation and supporting employment. He explained that the central bank is closely monitoring the impact of tariffs on inflation and wants to assess the situation before making any changes. Powell also highlighted the importance of maintaining a stable economy for the American people, regardless of external pressures.

The Fed's interest rate committee, comprising 19 members, recently voted to keep the key rate unchanged. However, there are differing views among policymakers regarding future rate cuts. While some members foresee multiple reductions, others are more cautious, citing uncertainties in the economy.

Despite pressure from Trump to lower rates to reduce government interest payments, the Fed remains focused on economic health and inflation. Powell hinted that a rate cut might not happen until September, depending on how the economy responds to tariffs. While some Fed officials suggest a rate cut in July, others advocate for a more patient approach.

Trump's claims about the ECB cutting rates more frequently than the Fed are inaccurate. The Fed reduced its rate three times last year, while the ECB made eight cuts. The Fed has paused further reductions due to concerns about inflation caused by tariffs imposed by the president.

Inflation has remained subdued this year, despite tariff-related fears. The recent consumer price index data showed minimal price increases, indicating muted inflationary pressures. The Fed continues to assess the economic landscape and will make decisions based on data and economic indicators.

According to the source: AP News.