Powell emphasizes Fed’s obligation to prevent ‘ongoing inflation problem’ despite Trump criticism

Federal Reserve Chair Jerome Powell reaffirmed the central bank’s commitment to controlling inflation in his recent testimony before Congress. Powell indicated that the Fed will maintain its current stance on interest rates until the impact of tariffs on prices becomes clearer.

During his appearance before two congressional committees, Powell acknowledged the strength of the economy and the near-full employment of the labor market. However, he pointed out that inflation remains above the Fed’s target of 2%, citing uncertainty surrounding the effects of President Trump’s tariffs.

Powell emphasized the need to gather more information on the evolving economic landscape before considering any changes to monetary policy. He reiterated the Fed’s readiness to adjust its stance based on incoming data.

President Trump’s criticism of Powell has escalated in recent days, with the former president taking to his Truth Social platform to express his displeasure. Despite the pressure, Powell maintained that politics plays no role in the Fed’s decision-making process.

In terms of inflation, Powell projected a slight increase in the Fed’s preferred measure to 2.3% in May, with the core measure excluding food and energy expected to reach 2.6%. Powell highlighted the potential impact of tariffs on inflation, noting that historical trends suggest temporary price increases rather than sustained inflationary pressures.

The recent meeting of the Federal Open Market Committee (FOMC) resulted in a unanimous decision to keep rates unchanged. However, there is a division among members regarding future rate cuts, with some favoring a reduction as early as July if inflation remains subdued.

Market expectations point to a lower probability of a rate cut in July, with a higher likelihood of a reduction in September. The FedWatch gauge by the CME Group indicates a 23% chance of a cut at the upcoming meeting.

Overall, Powell’s testimony underscored the Fed’s cautious approach to monetary policy, prioritizing data-driven decision-making to ensure price stability and sustained economic growth. Despite external pressures, the central bank remains focused on fulfilling its dual mandate of full employment and low inflation.