Powell Expects Inflation to Rise in Coming Months Amid Tariff Pressures

Quick overview

U.S. Federal Reserve Chair Jerome Powell said the central bank expects an uptick in inflation over the coming months, and suggested that if not for President Donald Trump’s trade policy, interest rates would likely have been cut already this year.

Speaking at the annual central banking forum hosted by the European Central Bank, Powell said the Fed is anticipating “somewhat higher inflation readings over the summer.” However, he clarified: “If you strip out tariffs for a second, you’ll see inflation is essentially behaving as we expected.”

When asked directly whether the Fed would have cut rates if Trump’s reciprocal tariffs hadn’t been implemented, Powell replied: “I think that’s right. We paused when we saw the size of the tariffs and how virtually every U.S. inflation forecast increased materially as a result.”

Given that, Powell added, “As long as the U.S. economy remains in a solid position, the most prudent course of action is to wait, learn more, and assess the potential effects.”

Key Question

Asked whether July would be too soon to consider a rate cut, Powell said he couldn’t say yet, emphasizing that decisions will be data-dependent. However, he did confirm that “a solid majority of the FOMC [Federal Open Market Committee] participants” expect to resume rate cuts later this year.

“That, of course, depends on the incoming data we’ll be watching closely—particularly inflation, both seen and unseen, and developments in the labor market,” he added.

Clashing With Trump

During the event, questions inevitably turned to President Trump’s repeated criticism of the Fed—and of Powell personally—for refusing to cut rates in line with the administration’s demands.

“I’m very focused on doing my job,” Powell responded. “What matters is using our tools to meet the objectives Congress has assigned us: maximum employment, price stability, and financial stability. That’s 100% where our focus is.”

Powell, whose term ends in May 2026, declined to say whether he would seek a second term.

ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

Related Articles