Jerome Powell: Tariffs Cloud Inflation Outlook as Fed Considers Future Rate Cuts

Federal Reserve Chair Jerome Powell told lawmakers Wednesday that tariffs are adding a layer of uncertainty to the inflation picture, making the central bank’s job of managing interest rates more complex.

Speaking before the Senate Banking Committee, Powell acknowledged that predicting the inflationary effects of tariffs remains difficult. “The question is, who’s going to pay for the tariffs?” he said. “How much of it does show up in inflation? Honestly, it’s very hard to predict that in advance.”

His remarks came amid growing debate over whether the Fed should begin cutting interest rates later this year. While inflation has cooled more than expected in recent months, Powell emphasized that the central bank isn’t rushing into a decision. In testimony to the House Financial Services Committee just a day earlier, he noted that the broader economy remains solid and that inflation could still rise—potentially driven by tariff-related costs.

Still, some Fed officials appear more open to lowering rates sooner. Governors Christopher Waller and Michelle Bowman recently indicated they might support a rate cut as early as July, depending on incoming economic data.

During Wednesday’s hearing, Powell also faced questions about the Fed’s internal spending—particularly a renovation project for two buildings in Washington, D.C., that has seen its cost rise from an initial $1.9 billion to $2.5 billion. Some Republican senators voiced concerns about potential overspending.

Powell defended the project, dismissing reports of luxury additions. “There’s no VIP dining room, no new marble, no special elevators, no beehives, and no roof terrace gardens,” he said, pushing back against what he called inaccurate claims.

As the Federal Reserve navigates a tricky economic environment shaped by global trade tensions and domestic scrutiny, Powell’s testimony highlighted the careful balancing act ahead. With inflation still uncertain and political pressure mounting, the Fed’s decisions in the coming months could prove pivotal.