Powell Leaves Door Open to July Rate Cut Amid Tariff Tensions

Federal Reserve Chair Jerome Powell isn't ruling anything out. In a recent appearance at a European Central Bank conference, Powell made it clear that a July interest rate cut is still on the table, but emphasized that it all hinges on how incoming economic data evolves.

"I wouldn't take any meeting off the table or put it directly on the table," he said, referring to the Fed’s upcoming July 29–30 policy meeting.

While the Fed kept rates steady throughout the first half of 2025, Powell admitted that the central bank would likely have cut rates already if not for the economic jolt from Trump’s aggressive tariffs. The inflationary shock from those tariffs led the Fed to pause after a full percentage point of rate cuts in 2024.

“We went on hold when we saw the size of the tariffs,” Powell said, adding that inflation expectations jumped across the board as a direct result.

Waiting Game for Data and Inflation Clarity
Powell emphasized the Fed’s cautious stance. “The prudent thing to do is wait and learn more,” he said, noting that inflation could move in unexpected ways—higher, lower, sooner, or later. The central bank is prepared to react accordingly, but not to rush into a move it might regret.

Trump Turns Up the Heat
Meanwhile, pressure from President Trump is intensifying. In a public message, Trump lashed out at Powell, claiming he was “too late” and that his inaction had “cost the USA a fortune.” Trump urged an immediate and substantial rate cut, pointing to a list of global central banks with lower rates as evidence that the Fed is behind the curve.

Powell, however, deflected the political pressure, saying, “I'm very focused on just doing my job.” He reiterated the Fed’s dual mandate: ensuring maximum employment and price stability—not appeasing political noise.

Powell Eyes a Smooth Handoff
With roughly 10 months left in his term as Fed chair, Powell said his goal is to “hand over to my successor an economy in good shape.” He didn’t comment on whether he would serve out his term as governor through 2028, staying laser-focused on the here and now.

Bottom line: A July rate cut isn’t off the table—but don’t expect the Fed to be bullied into it. With tariffs distorting inflation forecasts and political pressure mounting, Powell is walking a tightrope. The data will decide.