By Francesco Canepa and Howard Schneider
SINTRA, Portugal (Reuters) -U.S. Federal Reserve Chair Jerome Powell on Tuesday reiterated the U.S. central bank plans to “wait and learn more” about the impact of tariffs on inflation before lowering interest rates, again setting aside President Donald Trump's demands for immediate and deep rate cuts.
“We're simply taking some time,” Powell said at a central bank gathering in Portugal, a day after Trump sent him a handwritten missive noting how low other central banks had cut rates and suggesting the U.S. needed to move. “As long as the U.S. economy is in solid shape, we think that the prudent thing to do is to wait and learn more and see what those effects might be.”
Yet Powell also declined to rule out a possible rate cut at the Fed's upcoming July 29-30 meeting, prompting investors to slightly boost the possibility of a reduction at that session and shifting focus to a jobs report to be issued on Thursday and new inflation data coming in two weeks, both covering the month of June.
Powell noted that a majority of Fed officials in recent projections do expect to lower the benchmark interest rate later this year, and are closely attuned to whether inflation increases this summer as policymakers and many economists expect.
“It's going to depend on the data…We are going meeting by meeting,” Powell said. “I wouldn't take any meeting off the table or put it directly on the table. It's going to depend on how the data evolve.”
July 9, in addition, is the deadline for the possible imposition of higher global tariffs.
The Fed is facing a complicated moment, weighing sometimes conflicting data that could leave officials faced with both rising unemployment and rising inflation, the worst of both worlds for a central bank tasked with maintaining both stable prices and maximum employment.
Uncertainty over trade and other administration policies has left businesses also unsure of what to do, and the Fed's decision-making has been under virtually daily assault from a president eager to install his own chair when Powell leaves the Fed's top job next May.
At the Sintra gathering, an annual forum sponsored by the European Central Bank and akin to the Fed's own yearly gathering at Jackson Hole, Wyoming, Powell got at least a momentary reprieve.
Asked about Trump's barrage of insults, Powell's comment that the Fed was focused “100%” on its inflation and jobs target drew applause from the audience and from the heads of the ECB, the Bank of England and other central banks who joined him onstage for a panel discussion.
