Jerome Powell rules out larger rate cut by US Fed, says tariff effects on inflation likely short-lived

United States Federal Reserve Chair Jerome Powell pushed back against calls for more aggressive easing on Wednesday, saying there was “no widespread support at all” within the Federal Open Market Committee (FOMC) for a half-percentage-point rate cut.

“There wasn’t widespread support at all for a 50-basis-point cut today,” Powell said, emphasising that such large moves are reserved for times when policy is “out of place and needs to move quickly to a new place.” He made the remarks at his press conference after the US Fed announced a 25 bps cut in policy rates to 4.00–4.25 percent in a widely anticipated move. Policymakers also signalled three cuts in 2025 — up from two pencilled in June — with two more quarter-point reductions this year, and additional moves in 2026 and 2027.

Powell pushes back against Trump pressure

The comments came after President Donald Trump had demanded deeper reductions, and newly appointed Fed Governor Stephen Miran dissented in favour of a larger cut. Powell reiterated that the committee remains united and committed to its dual mandate, adding: “We’re strongly committed to maintaining our independence.” He declined to comment directly on the administration’s pressure, saying: “It’s deeply in our culture to do our work based on the incoming data and never consider anything else.”

Tariffs and inflation outlook

On inflation, Powell said tariff effects were increasingly looking temporary. “The risks of higher and more persistent inflation have probably become a little less,” he noted. While higher tariffs had pushed up goods prices, Powell said it increasingly appeared to be “a one-time price increase, as opposed to creating an inflationary process.”

He added that inflation in goods prices is expected “to continue to build” through the rest of this year and into 2026, but described those effects as “not very large at this point.” Powell also noted that the pass-through to consumers has so far been limited, with many importing companies absorbing cost increases: “To the consumer, the passthrough has been pretty small … slower and smaller than we thought.”

Powell further said immigration trends, not tariffs, were a bigger drag on employment. “If you’re looking at why employment is doing what it’s doing, it’s much more about the change in immigration,” he said.

Market reaction

Equities saw a muted response to the decision, with the Dow Jones Industrial Average rising 0.5 percent, while the S&P 500 was flat and the Nasdaq slipped 0.2 percent. Bond yields inched higher, with the 10-year at 4.05 percent and the 2-year at 3.52 percent, while the dollar edged up.