Federal Reserve Chairman Jerome Powell defended the central bank’s monetary policy decisions during an often tense appearance before the U.S. House Committee on Financial Services on Tuesday.
Powell didn’t rule out an interest rate cut in July during his semiannual monetary policy report to Congress, but he reaffirmed his stance that the Fed has yet to see the full impacts of the Trump administration’s tariff policies in economic data.
However, the Fed chair noted that estimates predict the personal consumption expenditures (PCE) price index rose 2.3% in May, which would be an increase from April’s PCE inflation mark of 2.1%. The official Commerce Department inflation data is due on Friday.
Powell refused to comment when pressed by Chairman French Hill, R-Ark., on whether he agrees with fellow Federal Open Market Committee member Christopher Waller that longer-term inflation trends could support a “good news” rate cut as early as July.
“I think many paths are possible here,” Powell responded. “We could see inflation come in not as strong as we expect, and if that were the case, that would tend to suggest cutting sooner. We could see the labor market weakening, and that would also suggest cutting sooner.”
On the other hand, Powell added, “if we see inflation coming in higher or if the labor market were to remain strong, then we would probably be moving later.”
Rep. Rashida Tlaib, D-Mich., forcefully questioned Powell on whether the Fed’s monetary policy is contributing to a housing supply shortage. She referenced last week’s report that May housing starts hit a five-year low.
“In the short run, rates are high, and that’s going to weigh on housing activity,” Powell acknowledged. “But the best thing we can do for the housing market, the absolute best thing, is to restore price stability so that rates come down.”
Tariffs dominated the conversation throughout Powell’s testimony. He refused to take the bait, though, when asked by Rep. David Scott, D-S.C., about whether President Donald Trump has put forward a “coherent tariff policy.”
“I would never comment on the president of the United States in that way,” Powell said. “That’s just completely out of our lane. It’s really inappropriate for me to have any comment on that.”
At one juncture, Powell turned philosophical about his remaining time as chairman of the Federal Reserve. Though Powell’s term as Fed chair runs through May 2026, last week Trump mused on social media that “maybe, just maybe, I’ll have to change my mind about firing” Powell.
“All I want to do in what’s left of my time at the Fed is have the economy be strong and have inflation be under control and have a solid labor market,” Powell said. “I want to turn it over to my successor in that condition. Of course, that’s what keeps me up at night, is to do that, and that’s what I think about. That’s the only thing I think about.”
