Federal Reserve Chair Jerome Powell had plenty of opportunities Tuesday to tell lawmakers definitively the central bank will cut interest rates soon. He didn’t take any of them.

Instead, Powell reiterated his view that policymakers need not rush to adjust policy, a counter to President Donald Trump’s demands and recent statements from Fed Governors Christopher Waller and Michelle Bowman that signaled the two would be open to lowering rates as soon as July.

“If it turns out that inflation pressures do remain contained, then we will get to a place where we cut rates, sooner rather than later,” Powell said in response to a question about the possibility of a rate cut next month during a House Financial Services Committee hearing. “But I wouldn’t want to point to a particular meeting. I don’t think we need to be in any rush because the economy is still strong.”

Powell’s remarks before the congressional panel came on the heels of the Fed’s decision last week to leave interest rates unchanged in a range of 4.25%-4.5%. He has maintained policymakers should take a cautious approach to rate cuts as they wait for more clarity on the impacts of Trump’s economic policies, particularly on tariffs.

“The effects of tariffs will depend, among other things, on their ultimate level,” Powell said. “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 and several other policymakers have pointed to increased economic uncertainty stemming from the Trump administration’s stepped up use of tariffs to justify leaving rates steady for now. Many forecasters expect the tariffs to put upward pressure on inflation and dent economic growth, although those estimates carry significant uncertainty.

Powell underscored that a wide set of outcomes remains possible. Should inflation come in weaker than expected or the labor market deteriorate, he said, the Fed could cut rates sooner. Equally, he added, higher-than-expected inflation could push the Fed to keep holding.

“Many paths are possible here,” Powell said.

He acknowledged that recent economic data supported a case for lower rates. But, he emphasized, that data was backward-looking, and many economists expect “a meaningful increase in inflation” over the course of this year due to tariffs. “We can’t just ignore that.”

Treasury yields and the dollar declined during Powell’s testimony as traders priced in slightly higher odds of at least two Fed interest-rate cuts by the end of the year. They pointed to his comments on the potential for tariffs to contribute less to inflation than forecasters currently expect. Powell’s appearance coincided with the release of a weaker-than-anticipated consumer confidence gauge for June that also supported those wagers.

Fed officials signaled last week they see two rate cuts by year’s end, according to their median projection. Economists surveyed by Bloomberg expect a cut to come by September.

“His testimony continues to point to September as the next decision point and, on our read, is consistent with a September cut as a reasonable central case, but very far from guaranteed,” analysts at Evercore ISI said in a note to clients.

Several other Fed officials on Tuesday expressed their support for a wait-and-see approach to cutting rates.

Trump comments

The central bank’s on-hold position has angered Trump, who has consistently called for lower rates and argued the Fed is keeping borrowing costs for the U.S. government high by holding rates steady.

“ ‘Too Late’ Jerome Powell, of the Fed, will be in Congress today in order to explain, among other things, why he is refusing to lower the Rate,” Trump said on social media early Tuesday. “I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come.”

Trump has frequently shifted on the specifics of his tariff policies, and the administration says it’s working on trade deals that could affect the nature and level of the duties.

“Expectations of that level, and thus of the related economic effects, reached a peak in April and have since declined,” Powell said in his opening statement, which largely echoed remarks he delivered last week. “Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity.”

Powell said the tariffs’ impact on inflation could be short-lived or possibly more persistent.

Tariff effect

Avoiding the latter outcome “will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices and, ultimately, on keeping longer-term inflation expectations well anchored,” he said.

Economic data so far has shown limited impact from tariffs. Fed Governors Waller and Bowman have pointed to that dynamic, among other factors, in arguing the Fed could cut as soon as its next meeting in July. The Fed’s next gathering after that is in September.

Powell said Tuesday he expects to see the tariffs have meaningful effects on inflation over the summer months.

“There aren’t historical experiences we can consult here, really. So it may turn out that the pass through is less or more than we think, and I think we’re going to be learning,” he said. “We’re perfectly open to the idea that the pass through will be less than we think and, if so, that’ll matter for our policy.”

Powell described the overall economy and labor market as solid. He said inflation had eased significantly from highs reached in mid-2022, but was somewhat elevated above the Fed’s 2% objective. He added that beyond the next year or so, most measures of longer-term expectations remain consistent with the Fed’s inflation goal.

When Trump implemented tariffs during his first presidential term, the Fed lowered rates to counter concerns about economic growth. Powell said the current situation is different in part because inflation remains elevated.

“We haven’t fully restored price stability,” he said. “If there’s a meaningfully large and sustained inflation shock, we have to be careful about that.”

Powell is set to testify before the Senate Banking Committee on Wednesday.

(With assistance from Catarina Saraiva, Georgina Boos and Elizabeth Stanton.)

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