Fed Chairman: If It Were Not for Tariffs, Interest Rates Would Have Already Decreased

The Chairman of the Federal Reserve America (Fed) Jerome Powell said on July 1 that the Fed should have fallen interest rates deeper if it weren't for the tariff plans of President Donald Trump... When asked whether the Fed would fall interest rates if Trump did not impose high tariffs on imported goods this year, Powell replied: "I think so." "In fact, we have postponed the interest rate fall due to the scale of the tariffs and because inflation forecasts in America have risen significantly due to those tariffs," said the head of the central bank of America during a Q&A session at the annual conference of the European Central Bank (ECB) in Sintra, Portugal. This acknowledgment was made by Mr. Powell in the context of the Fed maintaining its interest rates despite increasing pressure to lower rates from the White House. In the most recent regular monetary policy meeting held last month, the Fed kept the federal funds rate at 4.25-4.5%. After three consecutive cuts with a total decrease of 1 percentage point, this rate from the Fed has remained unchanged since February of last year. The Fed's updated quarterly forecast still suggests that the Fed will fall interest rates twice this year. However, at the press conference following the Fed's June meeting, Mr. Powell said the Fed is in a "good position" to continue a "wait-and-see" approach. During the Q&A session on July 1, Mr. Powell was asked whether it is too early for the market to expect the Fed to lower interest rates in July. He replied that he "really can't say" and that "it will depend on the economic data." According to data from the FedWatch Tool of the CME exchange, traders are betting on a 76% chance that the Fed will keep interest rates unchanged in the July meeting. "We will make decisions on a meeting-by-meeting basis. I will not prejudge whether we will lower interest rates at any meeting or rule that out. It will all depend on how the economic data comes in," Mr. Powell said. The steadfast position of Mr. Powell and the Fed to keep interest rates unchanged has faced opposition from Mr. Trump and White House officials. Mr. Trump and some government officials have criticized Mr. Powell for not lowering interest rates. Last week, Mr. Powell referred to Mr. Trump as a "bad man" and "mediocre." When asked whether he would continue to hold the position of Fed governor after his term as chairman ends next year, Mr. Powell replied, "I have no information on that to provide you today." Mr. Powell's term as Fed chairman will end in May 2026, while his position as governor will extend until 2028. Global trade policy and Donald Trump's attacks on Powell have become the focus at the event in Sintra, a conference that brought together the Chair of the Fed and leaders of many other central banks around the world. International central bank leaders answered various questions, from whether they would act like Powell if they were in his position, to whether countries are decoupling from America. In recent times, Trump's unpredictable tariff policy has posed many challenges to the global market and monetary policymakers not only in America but also in other countries. After Donald Trump announced his retaliatory tariff plan in April, the American stock market fell sharply. However, since he postponed most of the retaliatory tariffs for 90 days, American stocks have rebounded strongly, and the S&P 500 index recently set a new record. Nevertheless, investors and policymakers are still faced with significant uncertainty regarding the future of global trade, economic growth prospects, and corporate profits. "All that I and anyone at the Fed wish for is to bring about an economy with stable prices, full employment, and financial stability. What keeps me awake at night is how to achieve those goals. I want to hand over to my successor an economy in good shape," Mr. Powell stated.