Powell urges caution on rate cuts

The Trump administration’s tariff plans may well just cause a one-time jump in prices, but the risk it could cause more persistent inflation is large enough for the central bank to be careful in considering further rate cuts, Federal Reserve Chair Jerome Powell told a US Senate panel on Wednesday. Though economic theory may point to tariffs as a one-off shock to prices, “that is not a law of nature,” said Powell, detailing why the central bank wants more information about the ultimate level of tariffs and the way they impact pricing and public expectations about inflation before lowering borrowing costs any further. “If it comes in quickly and it is over and done then yes, very likely it is a one-time thing,” that won’t lead to more persistent inflation, Powell said. But “it is a risk we feel. As the people who are supposed to keep stable prices, we need to manage that risk. That’s all we’re doing,” through holding rates steady for now.