The US Federal Reserve has kept interest rates unchanged this year, despite President Donald Trump's pressure on the independent central bank and Fed Chair Jerome Powell
AFP

Federal Reserve Chair Jerome Powell is set to tell lawmakers Tuesday that the central bank does not see an urgent need to reduce interest rates, even as President Donald Trump intensifies pressure for immediate cuts.

In remarks prepared ahead of his testimony to the House Financial Services Committee, Powell will argue that the U.S. economy remains strong enough for the Fed to wait and assess how recent tariff increases will affect broader conditions before making any policy moves.

"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 stated, according to Reuters.

He warned that one-off price increases caused by tariffs could potentially become more entrenched unless carefully monitored, saying the Fed's role includes preventing such short-term shocks from turning into lasting inflation risks.

The Fed has kept its key interest rate unchanged at 4.25% to 4.50% since the end of last year. Although policymakers have penciled in the possibility of two cuts later in 2025, Powell's tone suggests there is no immediate plan to ease. This comes despite recent signals from two Fed officials who indicated openness to lowering rates as early as July.

At last week's Fed meeting, officials again held rates steady for a fourth straight time. Speaking to reporters afterward, Powell said patience would allow the central bank to better understand how Trump's new tariffs might ripple through the economy — a sentiment he is expected to reinforce during today's hearing.

Since returning to the White House, Trump has imposed sweeping new trade duties, including a 10% blanket tariff on nearly all foreign imports, along with higher rates on steel, aluminum, and vehicles. While the economic fallout has been limited so far — thanks in part to companies building up inventories — economists caution that prolonged trade tensions could stoke inflation and slow growth.

Hours before Powell's testimony, Trump lashed out on social media, repeating his call for deep rate cuts. "Rates should be at least two to three points lower," he wrote on Truth Social, adding, "I hope Congress really works this very dumb, hardheaded person, over."

Despite the criticism, Powell is expected to maintain the Fed's independent stance. According to AP News, the Fed Chair will emphasize that it is too early to know how trade policy changes will affect consumer spending or business investment.

"Increases in tariffs this year are likely to push up prices and weigh on economic activity," Powell noted in his remarks. Still, he added, "despite elevated uncertainty, the economy is in a solid position."

Although inflation has cooled from its 2022 peaks, Powell acknowledged it is still "somewhat elevated" compared to the central bank's 2% target — reinforcing the Fed's cautious approach.

His full testimony is scheduled for later today, where lawmakers are expected to press him on inflation, interest rates, and the impact of Trump's trade agenda.