Federal Reserve Chair Jerome Powell said Tuesday that the central bank would likely have already cut interest rates this year if not for the shock generated by President Trump's tariffs.
When asked Tuesday if Trump's tariffs held up the Fed's plan to cut interest rates, Powell agreed.
“I think that’s right,” he said at a central banking conference in Portugal. “We went on hold when we saw the size of the tariffs … All inflation forecasts for the United States went up materially as a consequence of the tariffs.”
The confirmation is likely to draw more backlash from Trump, who has reset U.S. trade relations with wide-ranging tariffs and bashed Powell for pausing cuts, which started last year.
In April, Trump announced tariffs against dozens of countries using a novel calculation based on trade deficits.
He imposed a general tariff of 10 percent and ended up raising tariffs on China to 145 percent.
Powell said Tuesday he’s expecting to see higher inflation over the summer and that the Fed expects to lower rates later this year. Currently, the Fed is forecasting two quarter-point rate cuts for 2025.
Powell also discussed handing the economy over to his “successor,” though he did not formally comment on whether he was leaving the Fed board altogether when his term expires next May.
“I have a little more than 10 months left on my terms as chair,” he said. “I want to hand over to my successor an economy in good shape.”
Powell could choose to serve on the Fed board through 2028, which would be an unusual step for a former chair, but has not commented on whether he would do so.
Trump on Monday shared a handwritten note to Powell urging him to lower interest rates, his latest attempt to push the central bank to do so.
Trump posted on Truth Social complaining that Powell and the rest of the Fed board of governors “should be ashamed of themselves” for declining to lower interest rates.
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