WASHINGTON: Federal Reserve Chair Jerome Powell said on Wednesday (June 25) that President Donald Trump's unprecedented tariff regime is making it challenging for the central bank to project inflation and determine when interest rate cuts may be appropriate.
AI Brief
Under questioning from Republican Senator John Kennedy of Louisiana, Powell said: “Since World War Two, really, it’s been a process of lowering tariffs globally. So there just isn’t a lot of modern learning on that. I think people look at the incidence of tariffs during the president’s first term, but those were about one-sixth the size of what people are estimating now. And they do find some effects on inflation ... which is why we are in a position of wanting to take our time and make a smart decision” on rates.
Referring to a Republican-led budget bill now being considered in the Senate, which the Congressional Budget Office estimates would increase the deficit by $2.4 trillion over 10 years, Senator Elizabeth Warren asked Powell about the relationship between increasing debt and inflation.
“I mean, theoretically, sure, fiscal policy can add to inflation,” Powell said. “But again, that’s really not something we comment on,” he added.
The House of Representatives has passed its version of Trump’s budget, which would renew his first-term tax cuts. Senate leaders hope to have the bill passed and delivered to Trump for sign
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- Powell said modern economic data on large-scale tariffs is limited but past tariffs did raise inflation slightly.
- He emphasised the Fed will move cautiously on interest rates amid potential new inflationary pressures.
- Powell declined to directly comment on the GOP budgets impact, though acknowledged fiscal policy can influence inflation.
Under questioning from Republican Senator John Kennedy of Louisiana, Powell said: “Since World War Two, really, it’s been a process of lowering tariffs globally. So there just isn’t a lot of modern learning on that. I think people look at the incidence of tariffs during the president’s first term, but those were about one-sixth the size of what people are estimating now. And they do find some effects on inflation ... which is why we are in a position of wanting to take our time and make a smart decision” on rates.
Referring to a Republican-led budget bill now being considered in the Senate, which the Congressional Budget Office estimates would increase the deficit by $2.4 trillion over 10 years, Senator Elizabeth Warren asked Powell about the relationship between increasing debt and inflation.
“I mean, theoretically, sure, fiscal policy can add to inflation,” Powell said. “But again, that’s really not something we comment on,” he added.
The House of Representatives has passed its version of Trump’s budget, which would renew his first-term tax cuts. Senate leaders hope to have the bill passed and delivered to Trump for sign
