Jerome Powell maintains wait-and-see policy as Trump ramps up pressure for rate cuts

President sends hand-written note to Fed chairman comparing US interest rates with rest of the world

Federal Reserve chairman Jerome Powell has so far defied pressure from US President Donald Trump to cut US interest rates. Reuters

Federal Reserve chairman Jerome Powell on Tuesday repeated his wait-and-see approach towards cutting US interest rates despite mounting pressure from US President Donald Trump.

“As long as the US economy is in solid shape, we think that the prudent thing to do is to wait and learn more and see what those effects might be,” Mr Powell said during a panel discussion at a European Central Bank forum in Portugal.

“We're simply taking some time,” he told delegates.

The Fed last month held its target range for interest rates between 4.25 and 4.50 per cent – the fourth consecutive time it has left rates unchanged.

When asked if July's meeting was too soon for a rate cut, Mr Powell said the Fed is going “meeting by meeting”.

“I wouldn't take any meeting off the table or put it directly on the table. It's going to depend on how the data evolve.”

Two Fed officials have indicated a willingness to cut rates in July because they believe tariffs will have a one-time inflationary impact, while others have backed Mr Powell's cautious approach.

Projections from the Fed's June meeting showed a majority of officials expect to cut rates twice this year.

This chart shows eight of 19 Fed officials expect to cut interest rates twice this year before slowing the pace of cuts in 2026. Screengrab / Federal Reserve

The Fed has maintained a cautious approach towards setting rates since Mr Trump's inauguration, with the president's shifting tariff policy causing economic uncertainty.

And Mr Powell said the Fed could have cut rates more by now were it not for tariffs, in a similar message he said during congressional testimony last week.

“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,” he said.

Most economists argue tariffs will lead to higher inflation and slower growth, although data in recent months was mixed.

A Commerce Department report last week showed the inflation picture has changed little, with the Fed's preferred metric rising by 2.3 per cent annually. Core inflation, which strips food and energy, came in higher than expected at 2.7 per cent.

But signs of tariff-related pressures are beginning to appear.

Meanwhile, an ISM survey on manufacturing on Tuesday showed manufacturing remained sluggish last month, although at a more modest pace.

“But worries about tariffs continue to crimp supply, leaving manufacturers fraught with trade-offs for holding inventory as pricing pressure builds,” Wells Fargo economists Shannon Grein and Tim Quinlan wrote in a note to clients.

Mr Powell on Tuesday said he expects to see higher inflation readings in the coming months, repeating a similar warning he has cautioned in recent weeks

His comments come a day after Mr Trump further escalated his attacks. On Monday, he sent a note to the Fed chairman written over a list of countries' interest rates.

“Jerome – You are, as usual, 'Too Late'. You have cost the USA a fortune – and continue to do – you should lower the rate – by a lot!,” the note read.

White House Press Secretary Karoline Leavitt holds up a letter she said President Donald Trump sent to Fed Chair Jerome Powell to lower interest rates. EPA

On the same missive, Mr Trump said US interest rates should be between 0.50 per cent and 1.75 per cent. Mr Trump has said he wants the Fed to lower rates to help service US debt.

Mr Powell has so far deflected the pressure coming from the White House.

“I'm very focused on just doing my job,” he said when asked if Mr Trump's attacks make his job more difficult.

“The things that matter are using our tools to achieve the goals that Congress has given us: maximum employment, price stability, financial stability. That's what we focus on – one hundred per cent,” he said.

Separate data released on Tuesday showed US job openings unexpectedly rose to a six-month high in May, but a decline in hiring showed there were some signs of a slowing labour market. Still, that is unlikely “to shake the Federal Reserve out of its wait-and-see mode”, Oxford Economics lead economist Nancy Vanden Houten said.