Fed Chair Powell says central bank would have cut interest rates if not for tariffs

ISTANBUL

US Federal Reserve Chair Jerome Powell said on Tuesday that the central bank would have cut the policy rate if US President Donald Trump had not imposed high tariffs.

When the Fed chair was asked if the Fed would have cut rates more by now if tariffs had not existed, during a European Central Bank forum in Portugal, Powell replied: "I think that's right."

"In effect, we went on hold when we saw the size of the tariffs, and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs," Powell said.

He said that the US economy is in a pretty good position, noting that inflation behaves as expected when tariffs are ignored.

Pointing out that the impact of tariffs has not yet been seen much, he said they expect higher inflation data over the summer.

“We are going meeting by meeting,” Powell noted. “I wouldn’t take any meeting off the table or put it directly on the table. It’s going to depend on how the data evolves.”

The chair's remarks followed the Fed's decision to hold the rates steady in the 4.25% to 4.5% range once again last month.

It warned in that statement that uncertainty about the economic outlook has diminished but remains elevated.

The central bank kept the rate at the historically high level of 5.5% from July 2023 to September 2024 before gradually lowering it to 4.5% in its December meeting.

The Fed's decision to keep the policy rate unchanged drew criticism from Trump, who repeatedly demanded Fed interest rate cuts, citing European central bank moves and warning delays could stall the US economy.

Trump last week called the Fed chair "terrible" and an "average mentally person," also saying that he should resign.

He also previously called Powell "a fool," "a major loser," and a "numbskull."

Powell stated Tuesday: “All I want, and all anybody at the Fed wants, is to deliver an economy that has price stability, maximum employment, (and) financial stability."

“What keeps me awake at night is: How do we get that done? I want to hand over to my successor an economy in good shape.”