Fed’s Powell Signals Rate Cuts Once Tariff Inflation Subsides
Speaking at a press briefing following the Fed's rate decision, Powell outlined conditions for monetary easing tied directly to import tax impacts on consumer costs.
"And that's what we expect to see over the course of this year. If we see that, that would be something that tells us that we can we can loosen policy," he added.
The central bank maintained its benchmark rate in the 3.5%-3.75% range, citing robust economic expansion.
Powell projected tariff effects on merchandise costs would crest before declining, contingent on trade policy stability.
"the effects of tariffs flowing through goods prices peaking and then starting to come down, assuming there are no new major tariff increases that are begun," Powell said during a news conference after the Fed's policy decision that he expects to see.
Economic Outlook Improves Sharply
The Fed chair painted an optimistic picture of America's economic trajectory, contrasting current conditions with the previous year's challenges.
"If you look at the incoming data since the last meeting, there is) clear improvement in the outlook for growth," said Powell. "Inflation performed about as expected, and as I mentioned, some of the labor market data came in suggesting evidence of stabilization. So, it's overall, a stronger forecast, really."
Powell characterized the nation's economic foundation as resilient entering the new year.
"The US economy expanded at a solid pace last year and is coming into 2026 on a firm footing," he said. "While job gains have remained low, the unemployment rate has shown some signs of stabilization and inflation remains somewhat elevated."
Dollar Fluctuations Off-Limits for Fed Commentary
When pressed about recent currency market turbulence, Powell declined engagement, deferring to executive branch authority.
"We don't talk about the dollar. We don't talk about what moves it around," Powell said, adding that the Treasury Department, in particular, and the Trump administration are in charge of the currency.
The U.S. dollar index plunged to multi-year lows Tuesday after President Donald Trump downplayed the drop. However, the currency recovered Wednesday following Treasury Secretary Scott Bessent's dismissal of potential intervention.
Supreme Court Appearance Signals Historic Stakes
Powell's decision to personally attend Supreme Court oral arguments in Lisa Cook's case this month represented an unprecedented action for a sitting Fed chair, underscoring the constitutional gravity at play.
"I will tell you why I attended," Powell said in response to a question. "I would say that that case is perhaps the most important legal case in the Fed's 113-year history. And I, as I thought about it, I thought it might be hard to explain why I didn't attend."
The Cook case examines presidential removal authority over Federal Reserve governors—a power Trump has sought to exercise. The president has accused Cook, who joined the board in 2021, of mortgage fraud involving dual primary residence claims. Federal statute permits removal of board members only "for cause," according to the Federal Reserve Act.
Central Bank Autonomy Defended Amid Political Pressure
Powell delivered a forceful defense of institutional independence, framing it as foundational to democratic governance and a safeguard against political interference in monetary decisions.
"The point of independence is not to protect policymakers or anything like that. It just is that every advanced economy, democracy in the world has come around to this common practice. It's just an institutional arrangement that has served the people well, and that is to have a separation between -- to not have direct elected official control over the setting of monetary policy," he said.
The comments arrive amid escalating tensions with Trump, who has repeatedly attacked Powell and his colleagues while advocating for presidential influence over rate-setting decisions and advancing his own board nominations.
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