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Washington, June 24 EST: The Federal Reserve isn’t in a rush. Chair Jerome Powell told Congress Tuesday that the central bank is sticking with its wait-and-see approach on interest rates, citing unresolved questions about how new U.S. tariffs will ripple through prices and growth.
For now, that means no change to the 4.25%–4.50% benchmark rate — and no guarantee of a summer rate cut, even though inflation has cooled modestly.
“We need more data,” Powell told lawmakers. Specifically, the Fed wants to understand whether the latest tariffs — due to kick in fully by July 9 — will trigger another round of price hikes or merely pass through with minimal disruption. Either way, the central bank isn’t making any moves until the picture clears.
It’s a shift in tone, and it lands at a sensitive moment. Just weeks ago, the Federal Open Market Committee had projected two quarter-point cuts before year-end. That was before the White House added new trade pressures to the mix. Now, those projections are starting to look more like placeholders.
The Fed’s Two-Way Risk
Powell’s testimony made one thing clear: the Fed sees risk in both directions. Move too soon, and they might fuel a fresh inflation cycle. Wait too long, and the economy could stall under the weight of high borrowing costs and weaker demand.
“We’re well-positioned to wait,” Powell said, a line that’s doing a lot of work right now. Internally, the Fed appears split. Governor Christopher Waller, typically aligned with Powell, said last week the data supports a rate cut as early as July. But Cleveland Fed President Beth Hammack publicly pushed back, warning that inflation isn’t reliably trending downward — and that hasty policy moves could backfire.
For Powell, that internal tension reflects a deeper institutional instinct: don’t guess. With inflation still hovering near 3%, above the Fed’s 2% target, officials want confirmation that cooling price trends aren’t being offset by new cost pressures from trade.
That’s not academic. Companies from retailers to manufacturers are bracing for higher input costs as tariffs raise prices on key imports. If those costs get passed to consumers, the Fed’s job gets harder. If they don’t, there’s more room to cut.
Markets Adjust to the Fed’s Patience
Markets heard the message. Following Powell’s remarks, traders cut their expectations for a July rate cut and shifted focus to September. According to futures pricing tracked by CME Group, the probability of a September move is rising, but not locked in.
It’s a case of realpolitik over theory. Investors are learning that even soft inflation prints aren’t enough when policy is facing new geopolitical inputs. As one Wall Street strategist put it Tuesday, “Powell’s not running a model — he’s reading the room.”
That room includes a Congress still grappling with global supply chain resets and a White House testing industrial policy through trade. The Fed doesn’t set tariffs, but it has to deal with the consequences. And for now, those consequences are uncertain.
Watching July 9 Like a Payroll Report
What happens next hinges on the data. Consumer price figures, labor trends, and real-world signals from corporate earnings will all feed into the next FOMC readout. But the key date isn’t just the next inflation report — it’s July 9, when the latest wave of tariffs formally takes effect.
Between now and then, the Fed will be looking for signs of pricing power — or the lack of it. Are businesses able to push through higher costs? Are consumers pulling back? Do inventories start piling up?
If the tariffs amount to noise, a cut later this summer is still on the table. But if they embed inflation back into the system, Powell’s patience could stretch into the fall — or beyond.
Powell’s Still Steering from the Middle
Tuesday’s hearing also served to reinforce Powell’s role as the Fed’s steady hand. While some colleagues lean more dovish and others more hawkish, Powell is trying to manage both message and tempo — resisting premature moves, but not ruling anything out.
It’s a balancing act he’s grown used to. Under his watch, the Fed has navigated a pandemic, a historic tightening cycle, and a reordering of global supply lines. Trade, it seems, is the next test.
And for now, the most powerful central bank in the world is doing what cautious institutions do best: waiting for the next shoe to drop.
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