Jerome Powell stated that tariffs have affected the Federal Reserve's decision-making regarding interest rates. The Fed paused rate cuts due to rising uncertainty and inflation forecasts stemming from the tariffs introduced by the administration. Powell highlighted that these tariffs significantly changed the economic outlook, leading to overall market uncertainty. After a series of rate cuts in 2024, the Fed chose to adopt a wait-and-see approach. Powell emphasized the need to understand the effects of the tariffs before making any adjustments to the interest rates.
During an onstage interview at the European Central Bank Forum, Jerome Powell stated, "I do think that [the tariffs have led us to hold off on cutting interest rates]." He noted that the Fed paused its decision-making as tariffs increased uncertainty and inflation forecasts."
Powell explained, "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." This indicated a cautious approach in light of unexpected economic changes.
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