Fed Chair says US interest rates would be lower if not for Donald Trump’s tariff plan.
Federal Reserve Chair Jerome Powell on Tuesday acknowledged that the US central bank likely would have adopted easier monetary policy by now if not for President Donald Trump’s aggressive tariff agenda, which he said materially pushed up inflation forecasts.
Speaking during a panel discussion at a European Central Bank forum in Sintra, Portugal, Powell was asked directly whether interest rates would be lower if the White House had not introduced sweeping new tariffs on key US trading partners earlier this year.
“I think that’s right,” Powell said, adding that “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.”
Fed holds steady amid White House pressure
The Fed has kept its benchmark interest rate unchanged in the 4.25%–4.5% range since December, resisting mounting political pressure from the Trump administration to begin cutting rates.
In its most recent projections, the central bank signaled two possible rate cuts before the end of 2025, but Powell reiterated that the Fed would remain data-dependent.
“We are going meeting by meeting,” Powell said Tuesday. “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.”
When asked whether a July rate cut was premature, Powell responded, “I really can’t say.”
As of Tuesday, futures traders assigned a 76% probability that the Fed would hold rates steady at its July policy meeting, according to the CME FedWatch tool.
Trump vs Powell on rate cut
The Fed’s cautious approach has drawn the ire of President Trump, who has launched increasingly personal attacks on Powell.
Last week, the president called Powell “terrible” and “a very average mentally person,” renewing calls for rate cuts to reduce borrowing costs for the federal government.
Powell deflected a question on Tuesday about whether he would consider staying on as a Fed governor after his current term as chair ends in May 2026, saying only, “I have nothing for you on that today.”
Trump has made no secret of his desire to replace Powell.
Meanwhile, he continues to apply public pressure on the Fed to ease monetary policy in the face of what he views as unjustifiably high rates.
Powell’s comments come amid persistent uncertainty over Trump’s trade policy.
The administration announced plans in April to impose a sweeping set of new tariffs on foreign goods, before partially rolling them back amid sharp market declines.
The tariffs, even in their paused state, have raised inflation expectations and complicated the Fed’s rate calculus.
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