Federal Reserve Chair Jerome Powell reiterated the central bank’s cautious stance on interest rates during his semiannual testimony before the House Financial Services Committee on Tuesday, June 24, 2025. Powell’s remarks underscored the Fed’s commitment to a ‘wait-and-see’ approach, directly clashing with former President Donald Trump’s persistent calls for immediate rate cuts.
During his testimony, Powell defended the Federal Reserve’s decision to maintain its benchmark interest rate in the range of 4.25% to 4.5%, where it has been since December. He emphasized that while recent data shows inflation has significantly decreased, and the unemployment rate has begun to tick higher, the threat of worsening inflation, particularly from the impact of tariffs, necessitates a patient approach. Powell stated that the Fed’s primary obligation is to prevent a one-time price increase from evolving into an “ongoing inflation problem.” (NBC News, CBS News, PBS NewsHour)
The Fed Chair acknowledged the potential toll of higher rates on American households, impacting car loans, credit cards, and mortgages. However, he pointed to the uncertainty generated by the Trump administration’s trade and immigration policies as a significant factor influencing the Fed’s decision-making. Powell noted that while current inflation readings are subdued, “all professional forecasters” anticipate an uptick in price growth later this year. The Fed’s preferred inflation measure is expected to rise from 2.5% to 2.6% in May, still above the central bank’s 2% target. (NBC News)
Former President Trump intensified his criticism of Powell ahead of the testimony, labeling him “very dumb” and attributing the Fed’s policies to “incompetence” that would harm the U.S. economy for years. Trump, along with figures like Federal Housing Finance Agency Director William J. Pulte, has repeatedly urged the Fed to cut rates, arguing there is “no inflation” and the economy is “great.” Pulte accused Powell of “politicization of the Fed.” (NBC News, PBS NewsHour, The Guardian)
Despite the unanimous vote by the Fed’s 19-member interest rate setting committee last week to keep rates unchanged, divisions are emerging among policymakers. While Powell suggested a rate reduction might not occur until September, two high-profile Fed governors, Michelle Bowman and Christopher Waller (both Trump appointees), have recently indicated that a rate cut could be considered as early as the next meeting in July. Waller stated that lowering government borrowing costs is “not our job,” emphasizing the Fed’s focus on economic health and inflation. (CBS News, PBS NewsHour)
Economists are increasingly concerned about the potential for stagflation—a scenario where both inflation and unemployment trend higher. Torsten Slok, chief economist at Apollo Global Management, noted that “Higher oil prices, higher tariffs, and restrictions on immigration are putting downward pressure on GDP growth and upward pressure on inflation.” While the consumer price index only ticked up 0.1% from April to May, and rose 2.4% year-over-year in May (up from 2.3% in April), the Fed remains vigilant about the potential for tariffs to fuel more persistent price increases. (NBC News, PBS NewsHour)
Currently, financial data firm FactSet indicates a roughly 20% chance of a rate cut in July, with an 80% probability for a reduction at the Fed’s September 17 meeting. Powell’s testimony reinforces the central bank’s commitment to its dual mandate of maximizing employment and maintaining price stability, even as it navigates a complex economic landscape and intense political scrutiny. (CBS News)
