Powell confirms that the Fed would have cut by now were it not for tariffs

Federal Reserve Chair Jerome Powell said Tuesday that the U.S. central bank would have easier monetary policy by now if not for President Donald Trump’s tariff plan.

When asked during a panel if the Fed would have lowered rates again by now had Trump not announced his controversial plan for levies on many foreign trading partners earlier this year, Powell said, “I think that’s right.”

“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 added at the event, which took place during a European Central Bank forum in Sintra, Portugal.

Powell’s admission comes as the Fed has entered a holding pattern on interest rates despite mounting pressure from the White House.

The Fed announced last month that it would hold the key borrowing rate steady once again. With that, the borrowing cost has sat in a targeted range of between 4.25% and 4.5% since December.

The central bank’s Federal Open Market Committee indicated via its so-called dot plot that there could be two cuts by the end of 2025. However, Powell said during a press conference last month that the Fed was “well positioned” to remain in wait-and-see mode.

Powell said on Tuesday, when asked if July would be too soon for a rate cut, that he “really can’t say” and that “it’s going to depend on the data.” Fed funds futures traders are pricing in a more than 76% likelihood that the central bank once again holds rates steady at the July policy gathering, according to the CME FedWatch tool.

“We are going meeting by meeting,” Powell said during Tuesday’s panel. “I wouldn’t take any meeting off the table or put it directly on the table. It’s going to depend on how the data evolve.”

The Fed’s unrelenting position has caught the ire of Trump and his administration, who have publicly admonished Powell for the central bank’s lack of recent movement on rates. Trump last week called Powell “terrible” and said he was a “very average mentally person.”

Global trade policy and Trump’s attacks on Powell took center stage at the event on Tuesday, where he was flanked on the panel by other leaders of central banks from around the globe. Other international central bank leaders fielded questions about if they would act the same as Powell in his position and if foreign countries were breaking away from the U.S.

Trump’s on again, off again tariff policy has put global markets and monetary policy makers on notice. The U.S. president first unveiled a plan for broad and steep levies on several foreign countries in early April, before delaying many of the most intense tariffs shortly after as U.S. markets torpedoed.

The U.S. stock market has more than regained losses recorded in the wake of Trump’s initial announcement, with the S&P 500 returning to all-time highs over recent days. However, market participants and monetary policy leaders still report feeling uncertain about the future of global trade and its impact on equity markets and the world economy.