Shropshire Star

Powell says Fed can wait to reduce interest rates as Trump demands cuts

Donald Trump has repeatedly urged the Federal Reserve to reduce borrowing costs.

By contributor Christopher Rugaber, AP
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Supporting image for story: Powell says Fed can wait to reduce interest rates as Trump demands cuts
Federal Reserve chairman Jerome Powell (Mark Schiefelbein/AP)

The US Federal Reserve will continue to wait to see how the economy evolves before deciding whether to reduce its key interest rate, chairman Jerome Powell has said.

His stance was directly at odds with US President Donald Trump’s calls for immediate cuts.

“For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” Mr Powell said in prepared remarks he will deliver before the House financial services committee.

Mr Powell is facing two days of what could be tough grilling on Capitol Hill, as Mr Trump has repeatedly urged the Fed to reduce borrowing costs.

Mr Powell has often received a positive reception before House and Senate committees that oversee the Fed, or at least muted criticism.

President Donald Trump speaks with reporters
President Donald Trump has called for immediate cuts (Evan Vucci/AP)

Mr Powell has also often cited his support in Congress as a bulwark against Mr Trump’s attacks, but that support could wane under the president’s ongoing assaults.

Mr Trump lashed out again in the early hours of Tuesday morning, posting on his social media site: “I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come.”

The last time Mr Powell appeared before Congress, in February, representative French Hill, the Arkansas Republican who chairs the committee, urged Mr Powell to ensure inflation returned to the Fed’s target of 2%, which typically requires keeping rates elevated.

The Fed’s 19-member interest rate setting committee, led by the chairman, decides whether to cut or raise borrowing costs. They typically increase rates to cool the economy to fight or prevent inflation, and lower rates when the economy is weak to boost borrowing and spending.

The Fed’s committee voted unanimously last week to keep its key rate unchanged, though the Fed also released forecasts of future rate cuts that revealed emerging divisions among the policymakers. Seven projected no rate cuts at all this year, two just one, while 10 forecast at least two reductions.

At a news conference last week, Mr Powell suggested the Fed would monitor how the economy evolves over the summer in response to Mr Trump’s tariffs and other policies before deciding whether to cut rates. His comments suggested a rate reduction would not occur until September.

Yet two high-profile members of the Fed’s governing board, Michelle Bowman and Christopher Waller, have since suggested the central bank could cut its rate as early as its next meeting in July.

Both officials were appointed by Mr Trump during his first term and Mr Waller is often mentioned as a potential replacement for Mr Powell when his term ends next May.

The Fed cut rates three times late last year to about 4.3%. Yet since then it has put rate cuts on pause out of concern that Mr Trump’s tariffs could push up inflation.

The president has slapped a 10% duty on all imports, along with an additional 30% levy on goods from China, 50% on steel and aluminium, and 25% on cars.

Yet inflation has steadily cooled this year despite widespread concerns among economists about the impact of tariffs.