Washington: US Federal Reserve Chair Jerome Powell said on Wednesday that the Fed may keep the policy rate constant while waiting to see if tariffs drive inflation, as the central bank left the policy rate unchanged again. Powell stated that they have made no decision for the September meeting. "We don't do that in advance. We will be taking that information into consideration and all the other information we get," the chair said in a press conference after the Fed interest rate decision.
According to Anadolu Agency, Powell mentioned that they believe the current stance of monetary policy leaves the central bank well positioned to respond in a timely manner to potential economic developments. He emphasized that the Fed wants to ensure President Donald Trump's tariffs do not cause an uptick in inflation before cutting rates. "A reasonable base case is that the effects on inflation could be short-lived, reflecting a one-time shift in the price level, but it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed," the Fed chair said.
Powell reaffirmed the central bank's commitment to a "moderately restrictive" policy stance. He stated, "Our obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem." The consumer inflation in the US rose 2.7% year-on-year in June, above estimates of 2.6%.
"Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen," Powell noted. In response to a question about the recent trade deals between the US and several trading partners, he remarked it's been a very "dynamic" time for trade negotiations, with many events occurring in the intermeeting period. However, Powell acknowledged that there are still many uncertainties left to resolve.
The remarks followed the Fed's decision Wednesday to hold the federal funds rate constant at the 4.25%-4.50% range, despite President Donald Trump's repeated calls to cut rates. The central bank noted that economic activity growth moderated in the first half of the year, although swings in net exports continue to affect the data.
Addressing the recent building renovation controversy and Trump's visit to the renovated buildings at the Fed's Washington headquarters, Powell commented it was a "nice visit." He stated, "We had a nice visit with the president. It was an honor to host him. It's not something that happens very often at the Federal Reserve to have the president come over, let alone to visit a building, but it was a good visit." When asked if the Trump administration's criticism about the renovations is linked to Trump's rate cut demands, Powell replied, "It's not for me to say."