Powell: Fed Will Wait on Interest Rate Moves as Tariff Impact Unfolds/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Federal Reserve Chair Jerome Powell said Wednesday that the central bank will take a wait-and-see approach before adjusting interest rates, citing uncertainty from recent Trump administration tariffs. Powell noted rising inflation and slower growth but called current conditions manageable. Market volatility has stirred debate among Fed policymakers.
Fed Interest Rate Outlook – Quick Looks
- Jerome Powell says Fed can wait before adjusting interest rates.
- Recent Trump tariffs have created uncertainty in financial markets.
- Powell warned tariffs could lead to higher inflation and slower growth.
- Fed unlikely to act unless there’s a market breakdown.
- Some officials support rate cuts if recession fears increase.
- Others prefer focusing on curbing inflation triggered by tariffs.
- Consumer and business confidence indicators have dropped.
- March inflation cooled slightly; hiring remains strong.
- Economic Club of Chicago hosted Powell’s latest remarks.
- Fed committee remains divided on next policy steps.
Jerome Powell Says Federal Reserve Will Hold Off on Interest Rate Changes Amid Trump Tariff Uncertainty
Washington (AP) – Federal Reserve Chair Jerome Powell said Wednesday that the central bank will remain cautious and patient as it evaluates the impact of recent economic policy shifts—particularly President Donald Trump’s sudden move to impose and then delay wide-ranging tariffs earlier this month.
In remarks prepared for the Economic Club of Chicago, Powell stated that the Federal Reserve is “well positioned to wait for greater clarity” before deciding on any adjustments to interest rates, signaling that no immediate changes are likely despite heightened market volatility.
“For the time being, we are well positioned to wait for greater clarity on the economic effects of recent policy changes, including those related to tariffs, immigration, taxation, and regulation,” Powell said.
Market Volatility Raises Questions, But Fed Holds Course
The Fed’s measured approach comes as markets have experienced sharply increased volatility since President Trump announced a sweeping set of tariffs on April 2—only to walk them back a week later by placing many of them on hold. Investors have since been speculating whether the Fed will step in to cut interest rates or take other steps to stabilize financial conditions.
However, Powell and other top economists indicate the central bank will not intervene unless more serious disruptions occur, such as a breakdown in the Treasury securities market or another financial malfunction.
Tariff Impact: Bigger Than Expected
Powell also warned that the scope of the tariffs proposed by the Trump administration is “significantly larger than anticipated,” and suggested that their economic effects will be more severe than previously forecast.
“We expect to see higher inflation and slower growth,” Powell noted, adding that while inflationary pressures may be temporary, there’s a growing chance they could linger longer than expected.
The concern aligns with sentiments expressed in the Federal Open Market Committee (FOMC) minutes from last month’s meeting, where several members voiced uncertainty about the duration of inflationary spikes tied to trade policy.
Divisions Within the Fed
While Powell remains in “wait-and-see” mode, internal divisions are beginning to show among Fed leaders. Earlier this week, Federal Reserve Governor Christopher Waller offered a more dovish outlook, stating that even long-lasting tariffs might only have a temporary inflationary impact.
“If the economy slows sharply—even if inflation remains elevated—I would support cutting interest rates sooner and more aggressively than I had previously thought,” Waller said.
His remarks contrast with those of Neel Kashkari, president of the Minneapolis Fed, who has signaled a greater concern over inflation control than recession risk. Kashkari and other hawkish members of the committee appear less inclined to support immediate rate cuts, believing the focus should remain on containing price spikes from external shocks like tariffs.
Current Economic Picture: Solid but Shaky
Despite uncertainty, the overall U.S. economy continues to show signs of resilience. Hiring numbers have remained strong, and inflation cooled slightly in March, according to the latest Labor Department data.
Still, economists warn of softening confidence. Indicators of consumer sentiment and business investment confidence have dropped sharply in recent weeks, potentially foreshadowing a downturn in spending and capital expenditures.
“There’s a psychological impact to economic policy whiplash,” said Sarah McDaniel, a senior economist with Brookshire Analytics. “It’s not just about tariffs—it’s about consistency, and right now, we don’t have that.”
What Comes Next?
For now, the Federal Reserve appears content to hold its current stance and observe how events unfold. With Trump’s tariffs creating economic ripples and internal disagreements among policymakers, the central bank is unlikely to make any sudden decisions unless hard data shows signs of a sharp contraction.
Investors, meanwhile, are left parsing Fed statements for clues on future actions—particularly as the 2025 election cycle heats up and global uncertainty continues to rise.
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