Fed Chair Jerome Powell holds firm on interest rates, resisting pressure to cut

Federal Reserve Chair Jerome Powell recently reiterated his stance on keeping interest rates steady, citing potential inflation risks stemming from U.S. tariffs. In his prepared testimony before the House Committee on Financial Services, Powell stood firm on maintaining the current benchmark rate range of 4.25% to 4.5%, a decision that has been met with pressure from President Trump to lower rates.

Despite the ongoing trade tensions and uncertainty surrounding the impact of tariffs, Powell emphasized the need for caution in adjusting borrowing costs for consumers and businesses. He pointed out that while tariffs could potentially lead to inflation, the effects may be short-lived or more persistent. The Fed’s data currently shows minimal impact on consumer prices due to tariffs.

On the other hand, there are indications of a slowdown in the U.S. labor market, prompting some Fed officials to suggest a rate cut. However, Powell maintained his position that it would be premature to make any immediate changes to monetary policy. He stressed the importance of gathering more data to better understand the economic outlook before considering any adjustments.

Powell also highlighted the Fed’s goal of preventing tariff-related price increases from fueling a prolonged inflationary period. Despite external pressures, Powell remains resolute in his approach, seeking a balance between supporting economic growth and addressing potential inflation concerns.

In response to Powell’s testimony, Sal Guatieri, a senior economist at BMO, noted the chairman’s unwavering stance in the face of external pressures. Guatieri highlighted the importance of assessing the long-term impact of tariffs on economic growth, inflation, and consumer expectations before making any policy changes.

Overall, Powell’s testimony underscores the Fed’s cautious approach to monetary policy in the face of economic uncertainties. As the Fed continues to monitor the evolving economic landscape, investors and policymakers alike will be closely watching for any potential shifts in the central bank’s stance.

This article was rewritten by Aimee Picchi, the associate managing editor for CBS MoneyWatch, with a background in covering business and personal finance for various national news outlets.