Donald Trump’s wishy-washy tariffs have been good for one thing: keeping Federal Reserve interest rates high, according to the central bank’s chair Jerome Powell.
Speaking at a European Central Bank forum in Portugal Tuesday, Powell said that the Federal Reserve probably would have brought down rates already if it hadn’t been for the president’s “Liberation Day” announcement.
“In effect, we went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” Powell said.
Last month, Powell announced that the central bank would maintain its key borrowing rate—between 4.25 percent and 4.5 percent—and wait to see the residual impacts of America’s new tariff plan before reducing interest. That’s because companies had already decided to increase product prices through the remainder of the year in reaction to hampered global supply chains, according to Powell.
“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 at the time.
The White House has not taken the news well. Last week, Trump derided the chairman as “terrible” and a “very average mentally person.”
“I’d say low in terms of what he does. Low IQ for what he does,” Trump said during a press conference at the NATO summit in The Hague.
Powell’s term atop the Federal Reserve expires May 2026, while his term as a Fed board member ends on January 31, 2028. And the president is already dreaming of the day, advertising to reporters that he has three or four replacements in mind for Powell, whom Trump appointed in 2018.
Trump threw even more pressure on America’s financial backbone Monday, when he wrote Powell a handwritten letter claiming that the chairman had cost America “a fortune.” The letter, held up by press secretary Karoline Leavitt in a press briefing, demanded that Powell cut rates “by a lot.”
In a social media post later that day, Trump also went after the Federal Reserve board, accusing them of standing by while Powell does his job balancing the American dollar in light of Trump’s trade antics.
“If they were doing their job properly, our Country would be saving Trillions of Dollars in Interest Cost,” Trump wrote. “The Board just sits there and watches, so they are equally to blame.”
But Powell is not alone in his assessment. Leading economists outside of the Federal Reserve have similarly argued that now is not the time to cut interest rates. Atlanta Fed President Raphael Bostic told Reuters last week that the country has “space and time” to figure out its ideal rates considering that companies have already boosted prices in reaction to heightened material and service costs in the wake of Trump’s tariffs.
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