U.S. Federal Reserve Chair Jerome Powell resumed two days of congressional testimony on Wednesday, appearing before the Senate Banking Committee after scrutiny before a House panel the day before that focused on the Fed's concerns that the Trump administration's tariff plans will raise inflation.
Powell's prepared testimony submitted to the Senate was the same as that delivered to the House Financial Services Committee, the Fed said as the Senate hearing began.
Even with recent inflation more moderate than expected, the central bank expects rising import taxes will lead to higher inflation beginning this summer, Powell told House lawmakers during a Tuesday hearing, and the Fed won't be comfortable cutting interest rates until officials see if prices do begin to rise and whether that process shows signs of becoming more persistent.
"We should start to see this over the summer, in the June number and the July number...If we don't we are perfectly open to the idea that the pass-through (to consumers) will be less than we think, and if we do that will matter for policy," Powell said on Tuesday.
“I think if it turns out that inflation pressures remain contained we will get to a place where we cut rates sooner than later...I do not want to point to a particular meeting. I don't think we need to be in any rush," particularly given a still-strong labor market and so much uncertainty about the impact of the still-unresolved tariff debate.
Tariffs have already risen on some goods, but there is a coming July 9 deadline for higher levies on a broad set of countries - with no certainty about whether the Trump administration will back down to a 10% baseline tariff that analysts are using as a minimum, or impose something more aggressive.
The Fed has held its benchmark interest rate steady in the 4.25% to 4.5% range since December, despite demands by President Donald Trump for immediate, and deep, rate cuts.
Economic projections released by the Fed last week showed policymakers at the median do anticipate reducing the benchmark overnight rate half a percentage point by the end of the year. But within those projections is a clear divide between officials who take the inflation risk more seriously - 7 of 19 policymakers see no rate cuts at all this year - and those who feel any tariff price shock will be less severe or quickly fade. Ten of the 19 see two or more rate reductions.
Investors currently expect the Fed to cut rates at its September and December meetings, but hold rates steady at its next meeting on July 29-30.
