Fed Holds Off on Rate Cuts Amid Trumps Criticism and Economic Uncertainty: Powell Explains Decision to Congress

The Federal Reserve has not yet cut interest rates, despite calls from President Donald Trump to lower them. Chair Jerome Powell said during a congressional hearing on Tuesday that the central bank is waiting to see how inflation will play out before making a decision.

Powell explained that economic forecasts predict a "meaningful increase in inflation over the course of this year," which has led the Fed to hold off on rate cuts. The current target rate is between 4.25% and 4.5%, where it has been since July 2023.

Trump has been critical of Powell's decision to hold steady on interest rates, and in a social media post on Tuesday, he said he believed interest rates should be "two to three points lower" than their current levels. "I hope Congress really works this very dumb, hardheaded person, over," Trump wrote. "We will be paying for his incompetence for many years to come."

During Powell's testimony before the House Financial Services Committee, members of Congress—mostly Democrats—asked him about Trump's remarks and policies, in particular on trade and immigration. Powell declined to comment each time, saying it was "inappropriate" for the central bank to comment on elected officials' policy decisions.

Powell has reiterated that the Fed wants to wait to make a rate cut until the future of the economy becomes clearer. "Rates are going to depend on the path of the economy, and that's highly uncertain," Powell said.

Economic uncertainty rose across the board in the wake of Trump's tariff policy, which upended global markets. Powell regularly pointed to the fact that underlying data, such as inflation and the unemployment rate, were strong. That gave the Fed time to wait before making a decision.

The main question remains the "timing, amount, and persistence" of any inflation increases that might arise from Trump's tariff policy. Powell said he didn't expect the effects of the tariffs to start hitting businesses and consumers until summer.

Powell's wait-and-see approach has made him few friends in the White House. Trump has defied traditions by actively opining on monetary policy, usually reserved exclusively for the non-political Federal Reserve Board. At times Trump even mused about firing Powell.

Proponents of cutting rates immediately believe it will help spur the economy and offset the declining growth projected after tariffs put the brakes on business investment. An anonymized compilation of Fed officials' individual forecasts for 2025, released last week, showed the median expectation was for two rate cuts by the end of the year.

This story was originally featured on Fortune.com.