Chair Powell presents the Monetary Policy Report on February 12, 2020. Photo by Federal Reserve Chair Jerome Powell told Congress on Tuesday that the Fed is not planning to cut rates anytime soon, publicly breaking from some of his own board members who have begun pushing for a move as early as next month.
Speaking before the House Financial Services Committee during his required semiannual testimony, Powell said the US economy remains “solid” but emphasized the need for more data before making any policy changes.
In his prepared remarks, Powell had pointed to the impact of President Donald Trump’s tariffs as a lingering inflation risk. He warned that while the economy continues to show strength, inflation readings could push higher.
The Fed’s preferred measure of inflation is expected to climb to 2.3% in May, up from 2.1% in April. The core index, which removes food and energy prices, is projected to hit 2.6%, a slight uptick from 2.5% the month before.
Fed officials push cuts while Powell resists
Despite Powell’s stance, two key members of the Federal Open Market Committee (FOMC) are now openly supporting rate reductions. Michelle Bowman, speaking in Prague this week, said she would support a cut at the Fed’s upcoming July meeting if inflation data “doesn’t spike.”
Her position follows similar comments made by Christopher Waller, who said he favors a careful approach to easing policy. Both were appointed by Trump during his first term and are currently seen as possible successors to Powell.
The divide became clearer after the release of the Fed’s latest “dot plot,” which anonymously records each member’s policy forecast. The internal outlook showed that nine of the nineteen officials want either no cut or one cut in 2025. Eight support two cuts, while two see the need for three. Although the vote to hold rates steady last week was unanimous, the longer-term views show a central bank that’s far from aligned.
Powell made clear that he sees no urgency. He said the Fed is watching how tariffs are affecting prices and wants to avoid reacting to what might just be a temporary bump. “The FOMC’s obligation is to keep longer-term inflation expectations well anchored,” he told lawmakers.
He stressed that the Fed cannot let short-term shocks lead to lasting policy shifts. “Without price stability,” he added, “we cannot achieve the long periods of strong labor market conditions that benefit all Americans.”
Markets pull back expectations as Trump slams Powell again
The futures market has started to cool off on the idea of a July cut. Traders are now pricing in only a 23% chance that the Fed will ease policy at the July 29-30 meeting.
There’s more confidence around September, but even that remains uncertain unless new inflation data supports the case. May’s consumer price index rose by just 0.1%, suggesting inflation is still tame for now. But the Fed is staying cautious, especially as Powell continues to prioritize a longer view over political or market pressure.
The political pressure hasn’t slowed down. Early Tuesday, Trump used his Truth Social platform to lash out again. Referring directly to Powell, he wrote: “Congress needs to work this very dumb, hardheaded person over.”
It’s not the first time Trump has attacked the Fed Chair, but this latest insult comes as the White House continues to blame the central bank for not supporting growth through cuts.
Bowman and Waller’s break from Powell has created friction inside the Fed, but it’s also reshaping market expectations fast. Investors and analysts are now watching every speech and every data release closely.
The sudden support for cuts by people in Powell’s own circle has raised fresh doubts about how much control he really has over the committee’s direction, and whether Trump might act on growing speculation to replace him next year.
At this point, the Fed is split. The chair says hold. Some governors say cut. The market is hedging. And Trump, once again, is shouting from the digital rooftop.
