In the face of economic signals that might justify lowering interest rates, U.S. Federal Reserve Chair Jerome Powell doubled down on his commitment to not lower interest rates despite rising dissent within the Fed itself against Powell’s “leadership. After this decision, calls for his firing and resignation have only increased, though President Trump has not yet responded (though he might by print time).
Powell’s justification for actions that his detractors equate to outright overt sabotage of the U.S. economy was to blame the uncertainty of the effect of Trump’s tariffs. He claimed “Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation could be short-lived—reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed.”
Jerome Powell holds interest rate steady—and is looking through tariffs by not raising rates– fortune.com
Source Link
Excerpt:
In a move that everyone was expecting, U.S. Federal Reserve Chairman Jerome Powell disappointed Donald Trump again yesterday by refusing to cut the base interest rate.
Indeed, a hawkish Powell even used the dreaded r-word (“raise”)—having suggested he is responsive enough to calls to “look through” tariff-induced inflation by not increasing interest rates, a notion which likely would have sent the Oval Office into a fury.
While rates held steady at 4.25% to 4.5%, a split among the Federal Open Market Committee (FOMC) is growing, with two members dissenting. This represents the highest level of friction within the FOMC for more than 30 years.
But despite the pressure—both from within the Fed and externally—Powell struck a cautious tone on cutting. For some time analysts have pencilled in a cut in September, the next meeting of the FOMC.