The U.S. Federal Reserve is taking a cautious approach to monetary policy, opting to hold interest rates steady amid growing concerns over inflationary pressures stemming from recent tariff increases. Despite mounting pressure from President Donald Trump for immediate rate cuts, Fed Chair Jerome Powell emphasized that the central bank needs more time to assess the broader economic impact of tariffs before making any adjustments.
“For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” Powell told the House Financial Services Committee.
Powell noted that while the Fed does not take a stance on trade policy itself, it is responsible for managing inflation, which may be influenced by the administration’s tariff decisions. “We aren’t commenting on tariffs. Our job is keeping inflation under control,” Powell said, signaling that the Fed is monitoring short- and medium-term impacts on consumer prices and economic activity.
Tariffs are expected to push up prices, with Powell warning that Americans could begin to see their effects in summer data releases. However, he also acknowledged that the pass-through to consumers could be less significant than anticipated, which would influence the Fed’s decision-making.
“If it turns out that inflation pressures remain contained, we will get to a place where we cut rates sooner than later,” he added.
The Fed recently voted to maintain the federal funds rate at a range of 4.25% to 4.5%, while forecasting rising unemployment and inflation through 2027. Powell reiterated that policy decisions will remain data-driven.
Meanwhile, consumer confidence in the U.S. is on the decline. A new report from credit agency TransUnion revealed growing pessimism among American households, with 27% of respondents expressing concerns about their family’s financial outlook over the next year—up from 21% just a few months ago.
Inflation was the top concern for 81% of those surveyed, while worries about a potential recession hit a two-year high. “There’s a very clear correlation between that pessimism and the uncertainty that’s come out of the tariffs,” said Charlie Wise, head of global research at TransUnion.
With inflation, trade uncertainty, and weak GDP data clouding the economic outlook, the Fed remains in wait-and-see mode.
