“For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” Powell said in prepared remarks he will deliver early Tuesday before the House Financial Services Committee.
Powell is facing two days of what could be tough grilling on Capitol Hill, as Trump has repeatedly urged the Fed to reduce borrowing costs. Powell has often received a positive reception before House and Senate committees that oversee the Fed, or at least muted criticism.
Powell has also often cited his support in Congress as a bulwark against Trump’s attacks, but that support could wane under the president’s ongoing assaults.
Trump lashed out again in the early hours of Tuesday morning, posting on his social media site: “I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come.”
The last time Powell appeared before Congress, in February, Rep. French Hill, the Arkansas Republican who chairs the committee, urged Powell to ensure inflation returned to the Fed’s target of 2 per cent, which typically requires keeping rates elevated.The Fed’s 19-member interest rate setting committee, led by the chair, decides whether to cut or raise borrowing costs. They typically increase rates to cool the economy to fight or prevent inflation, and lower rates when the economy is weak to boost borrowing and spending.The Fed’s committee voted unanimously last week to keep its key rate unchanged, though the Fed also released forecasts of future rate cuts that revealed emerging divisions among the policymakers. Seven projected no rate cuts at all this year, two just one, while 10 forecast at least two reductions.
At a news conference last week, Powell suggested the Fed would monitor how the economy evolves over the summer in response to Trump’s tariffs and other policies before deciding whether to cut rates. His comments suggested a rate reduction wouldn’t occur until September.
Yet two high-profile members of the Fed’s governing board, Michelle Bowman and Christopher Waller, have since suggested the central bank could cut its rate as early as its next meeting in July. Both officials were appointed by Trump during his first term and Waller is often mentioned as a potential replacement for Powell when his term ends next May.
The Fed cut rates three times late last year to about 4.3 per cent. Yet since then it has put rate cuts on pause out of concern that Trump’s tariffs could push up inflation.
The president has slapped a 10 per cent duty on all imports, along with an additional 30 per cent levy on goods from China, 50 per cent on steel and aluminum, and 25 per cent on autos.
Yet inflation has steadily cooled this year despite widespread concerns among economists about the impact of tariffs. The consumer price index ticked up just 0.1 per cent from April to May, the government said last week, a sign that price pressures are muted.
Prices for some goods rose last month, but the cost for many services such as air fares and hotels fell, offsetting any tariff impact. Compared with a year ago, prices rose 2.4 per cent in May, up from 2.3 per cent in April.
