Jerome Powell, then the Chair of the Federal Reserve, with President Donald Trump, July 24, 2025. They hosted their conversations deep in the belly of the beast — Washington, D.C. This meeting occurred amid a rising tide of worry over inflation, especially because inflationary pressures were being exacerbated by high tariffs driving up prices. U.S. Federal Reserve Board/Flickr The Fed held its federal funds rate steady in a range of 4.25%–4.5%. Powell highlighted the need for the central bank to make decisions based on economic fundamentals, without political interference.
In the weeks leading up to this meeting, one unexpected inflation forecast sent shockwaves through markets and spooked many with fears of an inflation comeback. Powell noted that “higher tariffs have begun to show through more clearly into prices of some goods but their overall effects on inflation and the economy remain to be seen.” During its last monetary policy meeting in September, the Federal Open Market Committee (FOMC) characterized inflation as “somewhat elevated.” It remains far below the record high we witnessed in June 2022.
After the meeting, Powell told reporters he was pleased with the way he handled himself in front of Trump. He stated, “We had a nice visit with the president. It was an honor to host him.” Despite the cordial atmosphere, the meeting underscored the ongoing tension between the Fed’s political independence and the President’s public calls for lower interest rates. Trump has repeatedly urged the central bank to reduce rates, claiming, “We have a man who just refuses to lower the Fed rate.”
Powell’s term as chair is set to expire in May 2026, positioning him at a critical juncture as he navigates political pressures while adhering to the Federal Reserve’s dual mandate: maintaining stable prices and maximizing employment. Against the backdrop of today’s broader economic uncertainty, Powell thus noted that he is absolutely open to the possibility of an interest rate cut. He could move in that direction as early as the next July meeting.
Only Michelle Bowman and Christopher Waller, two members of the FOMC, voted against the majority. Their dissent underscores the split views inside the central bank about the course of strategic monetary policy operations. Powell reiterated that political independence allows central bankers to make decisions that are informed by data and the evolving economic outlook. He stated, “We’ll do what we need to do to keep inflation under control,” highlighting his commitment to the Fed’s objectives.
The conversation about tariffs is very timely, given the impact they played on steering inflation upward. Powell acknowledged that while the immediate effects of tariffs on inflation could be temporary, there is a potential for more persistent impacts, stating, “Their effects on inflation could prove to be short-lived, but it is possible the inflation effects could be more persistent.”
The Federal Reserve is under intense criticism — even by its own admission — for its decision-making, lack of transparency, and consequences of its choices on overall economic stability. With a nod to current events, Powell emphasized the importance of staying the course on the economic data and avoiding political firestorms. He remarked, “If you were not to have that, there’d be a great temptation of course to use interest rates to affect elections, for example.”
