Federal Reserve Chair Jerome Powell defended the central bank's decision to not cut interest rates so far this year and said it would have already cut rates if not for tariffs.
At a forum put on by the European Central Bank on Tuesday in Sintra, Portugal, Powell was asked if the Federal Reserve would have cut rates if not for President Donald Trump's tariffs.
"I think that's right," Powell said. "In effect we went on hold when we saw the size of the tariffs, and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs. So, we didn't overreact. In fact, we didn't react at all. We're simply taking some time."
Powell also repeated his wait-and-see approach when it comes to interest rate cuts and how tariffs could impact the economy.
"As long as the U.S. economy is in solid shape, we think the prudent thing to do is to wait and learn more and see what those effects might be," he said.
Powell's latest comments come as President Trump has intensified his attacks on the Fed chair and continued to push for a rate cut.
On Monday, White House Press Secretary Karoline Leavitt said the president sent a note to Powell criticizing his decision not to lower the interest rate.
"Jerome, you are as usual too late," it said. "You have cost the USA a fortune and continue to do so. You should lower the rate by a lot."
The Fed cut interest rates in each of its final three meetings last year, but it has maintained rates between 4.25% and 4.5% through its first four meetings of this year.
The central bank meets again at the end of July, but Powell has not committed to what the bank will do.
"It's going to depend on the data," Powell said Tuesday. "We are going meeting by meeting."
At its June meeting, the bank's Federal Open Market Committee projected two rate cuts later this year.
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If the Fed decides to maintain rates again in July, it will mean the cost of borrowing money will remain high for consumers.
In making the decision, Powell has to consider the "trade-offs", says Thomas Stockwell, an assistant professor of economics at the University of Tampa.
"If you lower interest rates, that's going to increase economic growth, but it will also put upward pressure on prices," Stockwell said. "If you raise interest rates or keep them level, that's going to either keep growth the same or maybe lower growth, but it will keep inflation under control. So, we're in kind of a pick-your-poison mode here."
The Federal Reserve has a dual mandate to keep unemployment low and prices stable. It targets 2% inflation. In May, core inflation was at 2.7%.
