So far this year the Fed has not touched interest rates, keeping its target rate at its current level of between 4.25% and 4.5%, where it has been since July 2023.   

The decision to hold off on rate cuts earned Powell the ire of President Donald Trump. Since retaking office, Trump often demanded Powell lower interest rates. In a social media post on Tuesday, ahead of Powell’s congressional testimony, Trump said he believed interest rates should be “two to three points lower” than their current levels. 

“I hope Congress really works this very dumb, hardheaded person, over,” Trump wrote. “We will be paying for his incompetence for many years to come.”

During Powell’s testimony before the House Financial Services Committee Tuesday, members of Congress—mostly Democrats—repeatedly asked the Fed chair for his view of Trump’s remarks and policies, in particular on trade and immigration. Powell declined to comment each time, saying it was “inappropriate” for the central bank to comment on elected officials’ policy decisions. 

Powell has reiterated the Fed wants to wait to make a rate cut until the future of the economy becomes clearer. 

“Rates are going to depend on the path of the economy, and that’s highly uncertain,” Powell said. 

Economic uncertainty rose across the board in the wake of Trump’s tariff policy, which upended global markets. Stock markets have mostly recovered from an abysmal April when they cratered on fears global trade would be disrupted. During this period of turmoil, Powell regularly pointed to the fact that underlying data, such as inflation and the unemployment rate, were strong. That, Powell argued, gave the Fed time to wait before making a decision. 

The main question remains the “timing, amount, and persistence” of any inflation increases that might arise from Trump’s tariff policy, Powell said. The expectation is that tariffs will almost certainly cause a one-time spike in prices that then settles down. The fear is that doesn’t happen and prices remain high, or even continue to increase. 

Despite the tariffs having been implemented in April, Powell said he didn’t expect their effects—however unknown they may be—to start hitting businesses and consumers until summer. Most importers had already stocked up before the tariff policy, but as those inventories dwindle they’ll have to start buying levied goods. 

“I think we hadn’t expected this until now,” Powell said. “We now begin to think it is time for us to be seeing [impacts]. And if we don’t see it, that will matter. If we do see it, that will matter. So we’ve just taken a cautious approach to not lowering our policy rate until we have a little more confidence about the size and like the effects of that pull through.”

Powell’s wait-and-see approach has made him few friends in the White House. The president, never one for political norms, defied traditions by actively opining on monetary policy, usually reserved exclusively for the non-political Federal Reserve Board.  At times Trump even mused about firing Powell. Once he even floated the possibility of appointing himself as Fed chair. 

Proponents of cutting rates immediately believe it will help spur the economy and offset the declining growth projected after tariffs put the brakes on business investment. After the latest Consumer Price Index report earlier this month showed prices nudging up just 0.1%, Vice President JD Vance joined Trump in calling out Powell. 

“The president has been saying this for a while, but it’s even more clear: the refusal by the Fed to cut rates is monetary malpractice,” Vance wrote on X. 

An anonymized compilation of Fed officials’ individual forecasts for 2025, released last week, showed the median expectation was for two rate cuts by the end of the year.