Federal Reserve Chair Jerome Powell ramped up his war of words with President Donald Trump on Tuesday, blaming the commander-in-chief’s tariffs for holding up interest rate cuts.
Powell told a central banking conference in Portugal that the looming threat of a global trade war had slammed the brakes on plans to slash the key rate of borrowing that impacts what ordinary Americans pay on their home loans or credit cards.
“We went on hold when we saw the size of the tariffs. All inflation forecasts for the United States went up materially as a consequence,” he said during a panel organized by the European Central Bank.
He was speaking in the upmarket hillside resort of Sintra, which was once a summer retreat for Portuguese nobility and royalty.
Powell’s remarks are likely to further anger Trump, who has repeatedly hit out at America’s central banker for pausing rate cuts that started last year.
On Monday, the president sent Powell a handwritten note that he also posted on Truth Social, arguing the Fed board “should be ashamed” for not lowering rates and pointing out many other economies had slashed borrowing costs.
In April, Trump announced his so-called Liberation Day tariffs on dozens of countries, using a new calculation based on trade deficits. He imposed a general tariff of 10% and raised tariffs on China to 145%.
The 72-year-old, who was appointed during Trump’s first term, is also in hot water with lawmakers in the Senate who accuse him of lying during an appearance before its Banking Committee last week in which he denied The Post’s exclusive reporting about a $2.5 billion revamp of the bank’s DC HQ.
He reiterated the central bank’s plans to “wait and learn more” about the impact of tariffs on inflation before lowering interest rates, again setting aside President Trump’s demands for immediate and deep rate cuts.
“We’re simply taking some time,” Powell said at a central bank gathering in Portugal, a day after Trump sent him a handwritten missive noting how low other central banks had cut rates and suggesting the US needed to move.
“As long as the US economy is in solid shape, we think that the prudent thing to do is to wait and learn more and see what those effects might be.”
Discussing his tenure, Powell noted he has just over 10 months left as chair, with his term ending in May 2026.
“I want to hand over to my successor an economy in good shape,” he said.
Speculation is rife that the president may name his successor within the coming weeks, effectively becoming a ‘shadow’ Fed chair.
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Powell could remain on the Fed’s board through 2028, but chairs traditionally step down from the institution entirely once their spell in the hot seat draws to a close.
Central bank independence from the lobbying of elected officials, at least in the setting of interest rates, is considered key to keeping inflation under control.
At the same time Powell noted that a majority of Fed officials in recent projections still expect to lower the benchmark interest rate later this year, with none of the central bank’s remaining four meetings off the table.
The Fed next meets on July 29-30.
“It’s going to depend on the data, and we are going meeting by meeting,” Powell said. “I wouldn’t take any meeting off the table or put it directly on the table. It’s going to depend on how the data evolve.”
The Fed gets the latest employment data, covering the month of June, on Thursday, with economists expecting job growth to slow. New inflation data will be released in a couple of weeks, while July 9 is the deadline for the possible imposition of higher global tariffs.
The response of markets to Powell’s comments illustrated the very dilemma the Fed is facing as it weighs an intense combination of geopolitical risks and conflicting data.
Investors increased the estimated probability of a July rate cut to about one in four after Powell didn’t explicitly rule it out, then drove chances back down to close to one in five after data on US job openings came in stronger than expected.
