Trump tariffs have delayed interest rate cuts, Federal Reserve Chair Jerome Powell says

Federal Reserve Chair Jerome Powell said Tuesday that the U.S. central bank has held off on lowering interest rates this year because of President Trump’s tariffs.

Speaking at a gathering of central bankers in Portugal, Powell said “I think that’s right” in response to a moderator’s question about whether the Fed would have cut its benchmark rate if not for the U.S. imposing steep tariffs on key trading partners. 

“In effect, 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 of the tariffs,” Powell said. “So we didn’t overreact — in fact, we didn’t react at all. We’re simply taking some time.”

Powell said that tariffs have yet to have much of an impact on the U.S. economy, but reiterated his view that the levies could lead to higher inflation later this summer. 

The White House did not immediately respond to a request for comment. 

Trump administration officials say steeper tariffs are necessary to reinvigorate the U.S. manufacturing sector; ensure fair trade with other countries; and advance other domestic policy priorities, such as curbing the flow of unauthorized immigrants and fentanyl into the U.S.

President Trump has repeatedly lashed out at Powell this year over the Fed’s decision to keep interest rates level. In June, Mr. Trump publicly mused over whether to fire him, although many legal experts say it’s not clear he has the constitutional authority to do so. 

The president said in a post Monday on Truth Social, his social media platform, that Fed officials “should be ashamed of themselves” for not moving sooner to ease interest rates. 

Although Powell chairs the central bank, interest-rate decisions are set jointly by the Federal Open Market Committee, a 12-member panel of Fed officials. 

The Fed on June 18 opted to hold the federal funds rate — what banks charge each other for overnight loans — steady for a fourth straight meeting. Powell on Tuesday said the Fed continues to monitor the effect of tariffs on economic growth and inflation. 

“As long as the economy is in solid shape, we think the prudent thing to do is to wait and see what those effects might be,” Powell said, alluding to the tariffs. 

Powell, whose term as Fed chair ends on May 15, 2026, also sought to underline the importance of insulating central bankers from political pressure. 

“We’re trying to deliver macro stability, financial stability, economic stability for the benefit of all the people,” he said at the European Central Bank forum. “If we’re going to do that successfully, we need to do it in a completely nonpolitical way, which means we don’t take sides, we don’t play one side against the other, we stay out of issues that are really not our bailiwick.”