Federal Reserve Chair Jerome Powell warned Congress on Tuesday that tariffs could start pushing inflation higher this summer—just as the Fed weighs whether to cut interest rates.
During a tense House Financial Services Committee hearing, Powell faced pressure from Republicans demanding to know why the Fed hasn’t lowered rates as President Donald Trump has urged.
Powell made clear: the Fed isn’t ready to cut. “I do not want to point to a particular meeting. I don’t think we need to be in any rush,” he said, citing a strong job market and tariff uncertainty.
He added that if tariffs do drive prices up, Americans could start feeling it soon. “We should start to see this over the summer, in the June number and the July number.”
However, Powell left room for flexibility. “If we don’t, we are perfectly open to the idea that the pass-through will be less than we think, and if we do that will matter for policy.”
“If it turns out that inflation pressures remain contained we will get to a place where we cut rates sooner than later,” he added.
Powell emphasized the Fed isn’t judging Trump’s trade policies—just reacting to the economic fallout. “We aren’t commenting on tariffs. Our job is keeping inflation under control.”
“All professional forecasters I know of…expect a meaningful increase in inflation over the course of this year,” he told lawmakers, defending the Fed’s cautious stance.
Powell’s comments caused markets to shift expectations, betting on a possible rate cut in September rather than July, and perhaps another later this year.
Trump, who appointed Powell but has repeatedly criticized him, posted ahead of the hearing: “We should be at least two to three points lower… I hope Congress really works this very dumb, hardheaded person, over.”