Federal Reserve Chair Jerome Powell defended the decision to keep interest rates unchanged on Wednesday, saying inflation has eased but not enough to warrant cuts, especially with trade and geopolitical risks clouding the outlook.
“Incoming inflation data has been encouraging,” Powell said during his press conference, pointing to three consecutive months of positive readings, “but inflation is still running somewhat above our 2% longer-run objective.”
Asked why the Fed cut rates in December but didn’t move now despite similar inflation, Powell pointed to the evolving inflation forecast: “We saw a 2.5% forecast in December, 2.8% in March and 3.1% now… That’s due to the effects of the tariffs.”
Powell made clear that tariffs—particularly those tied to recent changes in trade policy—remain a significant source of uncertainty. He noted that “we’re beginning to see some effects” of tariffs on prices, especially in goods like personal computers and audiovisual equipment, but emphasized that the full impact may take months to filter through.
Powell added that business surveys indicate “many companies do expect to …