Federal Reserve Chairman Jerome Powell said on Tuesday that the Fed needs more time to observe whether the rising tariffs will push up inflation before considering the interest rate cuts requested by President Donald Trump.

Powell stated in prepared testimony for a hearing before the House Financial Services Committee this morning: "The increase in tariffs this year could push prices higher and put pressure on economic activity."

"The impact on inflation could be temporary, reflecting a one-time change in price levels. But the impact on inflation could also be more lasting... At present, we are fully conditioned to wait for further understanding of the possible direction of the economy before considering adjustments to the policy stance."

After Powell's testimony was released, investors reduced bets on the Fed possibly cutting rates as early as the July meeting and increased expectations for a rate cut in September, while also believing there would be another cut later this year.

As is customary for Powell's semiannual congressional testimony, the content of this testimony is generally consistent with the latest policy statement approved by the Fed last week. Fed officials unanimously voted at the last meeting to maintain the benchmark interest rate in the current range of 4.25% to 4.5%, and did not signal an imminent rate cut.

The new economic forecasts released at that time showed that the median forecast among officials anticipated two 25 basis point rate cuts by the end of this year, which aligns with current market pricing.

In recent days, two Fed governors (both appointed by Trump) indicated that given inflation has not risen due to tariffs, rates could decline as early as the July meeting, while two regional Fed presidents expressed concern that inflation could escalate for the remainder of the year.

Trump appointed Powell as Fed chairman during his first term, but is expected to replace Powell when his term ends next spring. Trump has repeatedly called for significant rate cuts.

"Our rates should be at least two to three percentage points lower," he stated in a social media post before the hearing and added, in reference to Powell, that he hopes "Congress really fixes this very stupid, stubborn person."

Powell has built a solid alliance with Congress during his three terms as Fed chairman, often receiving praise from both Republican and Democratic figures for overseeing the Fed.