Federal Reserve Chair Jerome Powell has confirmed that the U.S. central bank would have already cut interest rates if not for recent tariff plans announced by President Donald Trump. Speaking at a forum hosted by the European Central Bank in Portugal, Powell explained that the prospect of higher tariffs raised inflation expectations significantly, prompting the Fed to pause its planned monetary easing.

The Federal Reserve had been under pressure to reduce borrowing costs as inflation appeared to ease earlier in the year. However, when Trump introduced a plan to raise tariffs on imported goods in April, economic forecasts quickly shifted. The new trade measures caused a noticeable jump in inflation projections, making it risky for the Fed to cut rates.

Since December 2024, the Fed has kept its key interest rate steady between 4.25% and 4.5%. While many investors had anticipated a cut by mid-2025, Powell said the Fed chose to take a cautious, data-driven approach. “We are going meeting by meeting,” he said, adding that whether a rate cut will happen in July remains uncertain and will depend on further data.

The Fed’s cautious stance has drawn criticism from Trump, who recently labeled Powell “terrible” and “very average mentally.” Despite political pressure, Powell has maintained that his focus is on delivering stable prices, strong employment, and a healthy economy.

When asked about his future at the Fed after his term as chair ends in 2026, Powell declined to comment, although his position as a Fed governor lasts until 2028.

Global markets have been volatile in response to the back-and-forth tariff announcements. Investors are struggling to forecast long-term trade policy, making the Fed’s path forward even more complex. Still, Powell emphasized that the Fed’s goal remains clear: maintain stability in prices and jobs.