Powell shifts the blame! If it weren't for Trump, I would have lowered interest rates long ago!

Source: China Fund Reporter Taylor

Hello everyone, pay attention to the latest news from Federal Reserve Chairman Powell about interest rate cuts.

Powell: The Fed would have already cut interest rates if it weren't for the tariffs.

On July 1, Federal Reserve Chairman Powell stated that if it weren't for the tariff plan introduced by Trump, the Federal Reserve would likely have adopted a more accommodative monetary policy by now.

At the European Central Bank forum held in Sintra, Portugal, Powell was asked during a panel discussion: If Trump had not announced tariffs on numerous foreign trading partners earlier this year, would the Fed have cut rates again? To this, Powell responded, "I think so."

Powell added, "In fact, when we saw the scale of the tariffs, we decided to hold steady, as all inflation expectations for the U.S. rose significantly due to the tariffs."

Powell's remarks indicate that despite increasing pressure from the White House, the Federal Reserve is still adopting a wait-and-see approach regarding interest rate policy.

Last month, the Federal Reserve once again kept the key lending rate unchanged. Since December of last year, the rate has remained within the target range of 4.25% to 4.5%.

The Federal Open Market Committee (FOMC) of the Federal Reserve indicated through its so-called dot plot that there may be two rate cuts by the end of 2025. However, Powell stated at a press conference last month that the Federal Reserve "is prepared to remain patient."

When asked if it is too early to cut interest rates in July, Powell stated, "I really can't say right now, it will depend on the data."

According to the CME FedWatch tool, Federal Funds futures traders expect a probability of over 76% that the Federal Reserve will keep interest rates unchanged in July.

Powell said during a panel discussion on Tuesday: "We are looking at the situation one meeting at a time. I will neither rule out any meetings nor directly include them in the plan. It entirely depends on how the data evolves."

Powell stated that he expects the impact of tariffs to be reflected in inflation data over the coming months, while also acknowledging that there are still many uncertainties. "We are closely monitoring this. We expect to see some higher (inflation) readings during the summer."

However, he added that decision-makers are also prepared to respond, acknowledging that these impacts "may be higher or lower than we expected, and may occur earlier or later."

The Federal Reserve is caught between predictions and the latest data.

The Federal Reserve is currently facing an awkward situation: on one hand, there are its predictions about inflation, and on the other hand, the latest data has not yet reflected any significant pressure.

Since the beginning of this year, the Federal Reserve has not lowered interest rates—despite constant pressure from Trump—partly to confirm whether the price increases driven by tariffs will evolve into more persistent inflation. However, so far, this increase has not been clearly evident.

Powell said, "We believe the most prudent course of action is to remain patient and continue to observe to see how these impacts will play out."

In June, Federal Reserve policymakers unanimously voted to keep interest rates unchanged once again. However, the latest quarterly forecasts show that officials have differing views on the future trajectory of interest rates.

Ten officials expect at least two interest rate cuts this year, while seven expect no cuts until the end of 2025, and two only expect one cut before the end of the year.

Trump has imposed new tariffs on dozens of American trading partners and has wavered repeatedly on specific tax rates and the progress of trade agreements, bringing uncertainty to the economic outlook. The market generally predicts that these tariffs will increase inflationary pressures and hamper economic growth.

However, from the perspective of economic data, there is currently almost no visible impact of tariffs on either prices or the labor market. Trump and several senior officials in his administration have seized on this point and continue to pressure for an interest rate cut as soon as possible.

Powell said, "We have always emphasized that the timing, magnitude, and persistence of inflation are highly uncertain."

The two Federal Reserve governors appointed by Trump, Waller and Bowman, indicated that an interest rate cut could happen as early as this month's meeting. They both mentioned that recent moderate economic data is one of the reasons supporting their view.