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WASHINGTON (AP) — Federal Reserve Chair Jerome Powell said Wednesday that President Donald Trump's calls for lower interest rates won't lead the central bank to change its rate decisions.
“People can be confident that we’ll continue to keep our heads down, do our work, and make our decisions based on what’s happening in the economy,” Powell said, under questioning from members of the House Financial Services Committee. Powell spoke on the second day of his semiannual testimony to Congress.
Earlier Wednesday, Trump said on social media that “Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!”
Yet Powell indicated during a press conference last month that the Fed, after cutting its key rate three times late last year, would hold off on further cuts as it waited for evidence that inflation is moving closer to its 2% target.
And many Fed officials want to wait and see how Trump's policies, including the tariffs he has proposed and those he has put in place, affect the economy. Most economists worry that tariffs will at least temporarily push up inflation.
On Wednesday, the government reported that inflation picked up last month, with consumer prices rising 3% in January from a year earlier, up from a 3 1/2 year low of 2.4% in September. The uptick makes it even less likely the Fed will cut its key rate anytime soon. The Fed's rate influences borrowing costs throughout the economy, including mortgages, auto loans, and credit cards.
Powell also said that the Fed “has made great progress” on inflation “but we’re not quite there yet" to its 2% target.
“Today’s inflation print ... says the same thing,” he added. As a result, the Fed wants to keep rates “restrictive for now,” Powell added. At its current level, the Fed’s key rate is restricting borrowing and spending by consumers and businesses, Powell has said.
The Fed cut its key rate to about 4.3% from 5.3% last year. Fed officials in December had forecast that they would implement two cuts this year, but some economists now think the Fed may be on hold all year. Wall Street investors foresee only one cut, in October.
