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Will The Fed Cut Rates In 2025? Powell Says It All Depends On Tariffs

Federal Reserve Chair Jerome Powell told Congress Tuesday that while inflation has cooled from its 2022 peak, it remains “somewhat elevated,” and the central bank is not ready to adjust interest rates, yet.

However, he said the Fed is "well positioned to wait" for more clarity before making moves, and a "significant majority" of committee members expect to cut rates later this year.

Tariffs Could Reshape Fed’s Inflation Outlook

Much of the near-term policy uncertainty revolves around tariffs. Powell said the inflationary effects of recent tariff increases—especially those announced earlier this year—could be "short-lived" or potentially "more persistent," depending on their scale and speed of price transmission.

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"Increases in tariffs this year are likely to push up prices and weigh on economic activity," Powell said, acknowledging risks to both consumer prices and business investment.

He indicated the central bank is monitoring how tariffs ripple through supply chains and consumer pricing.

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