Federal Reserve Chair Jerome Powell has indicated that the U.S. central bank will adopt a cautious approach before making any changes to interest rates, emphasizing the need to assess the impact of ongoing tariffs on the economy.
Speaking before the House Financial Services Committee, Powell stated, “For the time being, we are well-positioned to wait and learn more about the likely course of the economy before considering any adjustments to our policy stance.” He highlighted that it’s essential to determine whether tariffs will push up domestic inflation before deciding on rate cuts.
Powell clarified that the Federal Reserve’s policies are not meant to critique or support trade strategies but to manage inflation and maintain economic stability. “Our job is keeping inflation under control, and when policies have short- and medium-term meaningful implications, then inflation becomes our job,” he explained.
The Fed Chair noted that increased tariffs could lead to higher prices for consumers and potentially weigh on economic activity. “We should start to see this over the coming months. If we don’t, we’re open to the idea that the pass-through to consumers will be less than we think, and that will matter for policy,” he said.
Hinting at future policy moves, Powell added, “If it turns out that inflation pressures remain contained, we will get to a place where we cut rates sooner than later.”
In its recent meeting, the Federal Open Market Committee decided to maintain the target range for the federal funds rate. Powell reaffirmed, “We will continue to determine the appropriate stance of monetary policy based on incoming data, the evolving outlook, and the balance of risks.”
Consumer Confidence Declines
The U.S. economy has shown signs of slowing down, with slight declines in gross domestic product and a slowdown in consumer spending growth. Surveys indicate that uncertainty over the economic outlook has intensified in recent months, partly due to trade policies.
A report by TransUnion, a consumer credit reporting agency, revealed that U.S. consumers’ confidence in their financial situations is deteriorating as tariff concerns grow. Data showed that 27 percent of respondents were pessimistic about their family’s financial situation in the next 12 months, up from 21 percent previously.
“There’s a clear correlation between that pessimism and the uncertainty that’s come out of the tariffs,” said Charlie Wise, head of global research and consulting at TransUnion. The survey also highlighted that inflation was the top concern for 81 percent of respondents, while worries about a potential recession have reached the highest level in two years.
