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Powell Says Fed Would Have Cut Rates Further If Not for Trump’s Tariffs

by Team Lumida
July 2, 2025
in Macro
Reading Time: 5 mins read
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Will September’s Fed Rate Cuts Surprise Investors? Here’s What Deutsche Bank Predicts

"Jerome H. Powell, governor of the Federal Reserve Board, discusses how markets currently function" by BrookingsInst is licensed under CC BY-NC-ND 2.0

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Key Takeaways:

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  1. Tariffs Delay Rate Cuts: Federal Reserve Chair Jerome Powell stated that the Fed likely would have cut interest rates further this year if not for the inflationary impact of Trump’s tariffs.
  2. Inflation Concerns: Powell expects tariff-driven price increases to appear in inflation data over the summer, though the timing and magnitude remain uncertain.
  3. July Rate Cut Possible: While the Fed held rates steady in June, Powell did not rule out a rate cut at the upcoming July 29-30 meeting, emphasizing a data-dependent approach.
  4. Economic Uncertainty: Trump’s tariffs and inconsistent trade policies have created uncertainty, with forecasters predicting upward pressure on inflation and slower economic growth.
  5. Fed Independence: Powell received applause for reaffirming the Fed’s independence amid Trump’s public pressure for rate cuts, with support from global central bank leaders like ECB President Christine Lagarde.

What Happened?

Speaking at the European Central Bank’s Forum on Central Banking in Portugal, Powell reiterated that the Federal Reserve paused rate cuts this year due to concerns about the inflationary effects of Trump’s expanded tariffs. The Fed is closely monitoring how tariffs impact prices, with Powell noting that inflation data could show higher readings in the coming months.

Despite holding rates steady in June, Powell left the door open for a potential rate cut in July, stating, “I wouldn’t take any meeting off the table.” The Fed remains divided, with some policymakers advocating for cuts this year, while others prefer to maintain current rates.

Trump’s tariffs on multiple trading partners, combined with inconsistent trade negotiations, have added uncertainty to the economic outlook. While economic data, including job openings, remain strong, the Fed is cautious about the long-term effects of tariffs on inflation and growth.


Why It Matters?

The Fed’s decision to hold off on rate cuts highlights the complex interplay between monetary policy and trade policy. Trump’s tariffs have created inflationary pressures that complicate the Fed’s ability to stimulate the economy through rate reductions.

For businesses and consumers, the uncertainty surrounding tariffs and interest rates adds to economic challenges, particularly as inflation risks and slower growth loom. Powell’s comments also underscore the importance of central bank independence, as the Fed navigates political pressure and economic volatility.

The global implications are significant, with central banks like the ECB closely watching the Fed’s actions as they manage their own economic challenges.


What’s Next?

The Fed’s next meeting on July 29-30 will be critical, as policymakers assess whether to cut rates amid mixed economic signals. Analysts will monitor inflation data over the summer to gauge the impact of tariffs and the Fed’s response.

Meanwhile, Trump’s trade policies and their effects on inflation and growth will remain a key focus for both the Fed and financial markets. The Fed’s ability to balance inflation risks with economic support will shape its policy decisions in the months ahead.

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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
‍Address: Lumida Wealth Management, 25 W 39th Street Suite 700, New York, NY 10018