Source: Sharecast
Speaking at the European Central Bank conference in Portugal, Powell said that the "prudent thing to do" was to wait, adding that the Fed could have cut rates sooner if it wasn't for the launch of Donald Trump's sweeping protectionist measures in early April.
When asked if the Fed would have cut interest rates by now if tariffs hadn't gone into effect, the policymaker said: "I think that's right."
"In effect we went on hold when we saw the size of the tariffs," he said. "Essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs. We didn’t overreact, in fact we didn’t react at all, We’re simply taking some time."
Excluding the impact of tariffs, inflation is running as expected, according to the Fed chair.
"We haven’t seen effects much from tariffs, and we didn’t expect to by now. We’ve always said the timing, amount and persistence of the inflation would be highly uncertain and it’s certainly proved that," Powell said.
"We’re watching. We expect to see over the summer some higher readings, but we’re prepared to learn that it can be higher, or lower, or later or sooner than we’d expected."
The Fed, which hasn't loosened monetary policy since December, has "cost the USA a fortune", according to Trump, who continues to criticise the central bank for not cutting interest rates more quickly like many other countries.
