White House Press Secretary Karoline Leavitt said Monday during the press briefing that President Donald Trump sent a letter to Fed chair Jerome Powell showing lower interest rates in other nations.
Federal Reserve Chair Jerome Powell on Tuesday said that the central bank has held off on cutting interest rates due to concerns about tariff-induced price hikes on consumers, adding that the Fed likely would’ve cut rates this year if not for those tariff worries.
Powell participated in a panel discussion about monetary policy at the European Central Bank Forum in Portugal with the leaders of other prominent central banks, including the European Union, the United Kingdom, Japan and South Korea.
Powell was asked whether the Fed would have cut interest rates more by now if it weren’t for the tariffs spurring inflation concerns.
“I think that’s right,” Powell said. “In effect, we went on hold when we saw the size of the tariffs and where essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs.”
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Fed Chair Jerome Powell said that higher inflation forecasts following tariff announcements caused the Fed’s pause on rate cuts. (Photographer: Al Drago/Bloomberg via Getty Images / Getty Images)
“So we didn’t overreact. In fact, we didn’t react at all. We’re simply taking some time – as long as the U.S. economy is in solid shape, we think the prudent thing to do is to wait and learn more and see what those effects might be. And again, they haven’t really shown up, and so for now we’re waiting.”
Earlier in the conversation, Powell noted that the U.S. economy is in a “pretty good position” with inflation having trended closer to the Fed’s 2% goal in recent years, while the unemployment rate at 4.2% is a sign of a healthy labor market.
“Ignore the tariffs for a second – inflation is behaving pretty much exactly as we have expected and hoped that it would,” Powell said.
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President Trump has repeatedly criticized Fed Chair Powell. (Getty Images/Photo illustration / Getty Images)
Powell went on to say that the Fed expects there will be higher inflation readings later this summer as tariff costs make their way through supply chains, though he said policymakers will monitor whether those impacts are greater or less than anticipated.
“We haven’t seen effects much yet from tariffs, and we didn’t expect to by now,” Powell said. “We’ve always said that the timing, amount and persistence of the inflation would be highly uncertain and it’s certainly proved that.”
“So we’re watching, we expect to see over the summer some readings, higher readings. But we’re prepared to learn that it can be higher or lower or later or sooner than we’d expected,” he added.
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President Donald Trump has repeatedly criticized Powell for acceding to his demands that the central bank lower interest rates to spur more economic activity, dubbing him “Mr. Too Late” and insulting his intelligence, calling him an “average mentally person” who has “low IQ for what he does.”
Trump nominated Powell as Fed chair in 2017, and his criticisms of Powell’s handling of monetary policy date back to the president’s first term.
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President Trump appointed Jerome Powell as Fed chair in 2017. (SAUL LOEB/AFP via Getty Images / Getty Images)
The president on Monday sent a note to Powell saying that the central bank has “cost the USA a fortune” for not cutting interest rates.
“You should lower the rate by a lot. Hundreds of billions of dollars are being lost and there is no inflation,” Trump wrote in the note, which White House press secretary Karoline Leavitt read during a press briefing.
Leavitt added that Trump sent Powell a chart showing all the countries in the world with lower benchmark interest rate targets than the Fed’s.
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The Fed has left its benchmark federal funds rate at a target range of 4.25% to 4.5% at each of its four meetings in 2025 so far. Its next meeting is scheduled for late July.
