Powell stands by 'wait and see' stance with Trump ramping up attacks on the Federal Reserve

WASHINGTON (AP) — Federal Reserve Chair Jerome Powell on Tuesday stuck to his position that the central bank will keep its key rate on hold while it waits to see how President Donald Trump's tariffs effect the economy, defying the steady stream of criticism from the White House, which wants lower borrowing costs.

Powell, speaking in Sintra, Portugal, repeated his view that U.S. inflation is likely to pick up later this summer, though he acknowledged that the timing and magnitude of any price increase from the duties is uncertain. But he said the Fed will stay on hold while it evaluates how the economy evolves.

“As long as the economy is in solid shape, we think the prudent thing to do is to wait and see what those effects might be," Powell said, referring to the sweeping duties Trump has imposed this year.

On Monday, Trump continued his attacks on Powell for not cutting the Fed's key rate, which Trump says would save U.S. taxpayers on interest costs on the federal government's debt. The president also extended his criticism to the entire Fed governing board, which participates on interest-rate decisions.

“The board just sits there and watches, so they are equally to blame,” Trump said. The attack on the board ratchets up pressure on individual Fed officials, such as Governor Chris Waller, who have been mentioned as potential successors to Powell, whose term ends in May 2026.

The Fed has kept its key short-term interest rate unchanged this year, at about 4.3%, after cutting it three times in 2024.

At a news conference in June, Powell suggested that the central bank would “learn a great deal more over the summer” about whether President Donald Trump's sweeping tariffs would push up inflation or not. The comment suggested the Fed wouldn't consider cutting rates until its September meeting.

Yet a few days later, Fed governors Waller and Michelle Bowman, who were both appointed by Trump, said that it was unlikely the tariffs would lead to persistent inflation. Both also indicated that they would likely support reducing the Fed's rate at its July 29-30 meeting.