Powell Says Trump’s Tariffs Delay Fed Rate Cuts
Federal Reserve Chair Jerome Powell stated at the Sintra conference that former President Trump’s tariff policies are delaying the Fed’s plans to cut interest rates. The new tariffs, including a 10% baseline levy on certain imports, have significantly raised inflation expectations, forcing the Fed to maintain current rates (4.25%-4.5%).
Analysts warn that tariffs could trigger stagflation, with JPMorgan lowering 2025 GDP growth forecasts to 1.3% and recession risks rising to 40%. The Fed now expects core PCE inflation to reach 2.8% this year, up from prior estimates.
Markets now see a 25% chance of a July rate cut, with higher odds (87%) in September. Powell stressed the Fed’s independence amid Trump’s pressure for aggressive cuts, vowing to base decisions on economic data rather than politics.
With tariff impacts likely peaking in Q3, the Fed remains cautious, balancing inflation risks against slowing growth. Further delays in rate cuts could heighten economic uncertainty.