On 14/6, during a hearing before the US House Financial Services Committee, Federal Reserve (Fed) Chair Jerome Powell was questioned by Republican lawmakers about why the Fed had not yet cut interest rates as President Donald Trump had demanded. Powell explained that he and many Fed officials predict inflation will soon accelerate again.

Powell also affirmed he is not ready to cut rates at the July meeting, as some colleagues recently expected. "I don't want to point to any particular meeting. We're in no hurry," he said, explaining that the labor market remains strong and the impact of import tariffs is still unclear.

The Fed chair suggested prices could rise this summer, in June or July. "If they don't, it means the impact on consumers will be less than anticipated. If inflationary pressures remain under control, we will cut rates sooner or later," he said.

Federal Reserve (Fed) Chair Jerome Powell during a hearing on 24/6. Photo: Reuters

Federal Reserve (Fed) Chair Jerome Powell during a hearing on 24/6. Photo: Reuters

Powell continued to be questioned for focusing too much on tariffs and not cutting interest rates, even though inflation has so far remained modest. He explained that the Fed's policy is not intended to support or oppose the White House's approach. It is solely to address the impact these policies have on inflation.

"We don't comment on import tariffs. Our job is to control inflation. When policy has a significant impact in the short and medium term on inflation, that's our business," he stated. Powell emphasized that every professional forecast he is aware of indicates inflation will rise significantly this year.

In his pre-submitted testimony to the House, Powell wrote: "The effects of tariffs may be only temporary, due to one-time price increases. But they also have the potential to be longer-lasting. At this point, we want to see more economic data before adjusting policy."

Following Powell's statements, investors lowered their expectations that the Fed would cut interest rates at its July meeting. The probability of a rate cut in September has thus increased. The Fed is expected to act once more by the end of the year.

The message from Powell's hearing was generally consistent with the Fed's policy statement last week. Accordingly, Fed officials agreed to keep the benchmark interest rate in the 4.25%-4.5% range and did not signal an impending rate cut.

In recent days, Michelle Bowman, vice chair for supervision at the Fed, and Fed Governor Christopher Waller, predicted that interest rates could be cut as early as July, as inflation has not risen as much as feared. Meanwhile, three regional Fed presidents warned that inflation could escalate in the near future.

President Trump has repeatedly urged the Fed to cut interest rates over the past few months. On Truth Social on 23/6, the US President reiterated his call for the Fed to cut rates by "2-3 percentage points" because the US is "not experiencing inflation". He argued that this would save the US $800 billion annually or more. Trump also continued to criticize Fed Chair Jerome Powell as "foolish, stubborn, and slow".

Ha Thu (via Reuters)