Powell says Fed will continue to monitor inflation before cutting rates
Fed Chair Jerome Powell told Senators Wednesday that the timeline on lowering interest rates is up in the air
Federal Reserve Chair Jerome Powell | C-SPAN/”June 24, 2025: Fed Chair Powell on Interest Rates” (CC license)
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Fed Chair Jerome Powell, tight-lipped while facing questions from lawmakers, didn’t say whether the Fed would cut rates in July (or even this summer).
But he also never definitively said it wouldn’t.
Odds of a 25-basis point interest rate cut at the FOMC’s late-July meeting increased from 18.6% to 20.7% today, per CME Group data. It’s a small move, but a move nonetheless — one that signals investors are reading between the lines when it comes to Fed-speak.
“If it turns out that inflation pressures do remain contained, we will get to a place where we cut rates sooner rather than later,” Powell told members of the House Financial Services Committee on Tuesday. “But I wouldn’t want to point to a particular meeting.”
It’s similar to what Powell said last week after the FOMC concluded its June meeting and announced it would hold interest rates for now.
Powell’s comment comes days after two Fed governors — both appointed by President Trump — said it may make sense to cut at the July meeting. Christopher Waller on Friday said the FOMC needs to have a rate cut on the table next month. Michelle Bowman agreed on Monday, adding that unless there’s a major uptick in inflation, a July cut should be in order.
Analysts had predicted tariffs would be impacting prices by now, weighing on recent progress on the inflation front. But economic readings so far have been contained. May’s headline CPI increased 0.1% over the month, less than projections of a 0.2% increase.
Annual inflation is still reading higher than the Fed’s 2% target (annual headline CPI for May came in at 2.4%), but it hasn’t jumped too much since President Trump’s “Liberation Day” in April. Headline PCE (the Fed’s preferred gauge) came in at 2.1% in April, a decrease from March (2.3%).
We’ve written before about why this may be. Businesses were expecting tariffs, so they proactively increased inventories. Trump’s tariff policies are also prone to revisions, so it’s understandable that companies are hesitant to immediately raise prices.
Oil prices have stabilized since their initial jump earlier this month, but the situation in the Middle East is precarious. Should things escalate, a surge in oil could derail progress on inflation.
Powell resumed his two-day congressional testimony this morning in the Senate, making similar comments about a need to monitor the economic situation before adjusting policy.
Stocks were mostly flat during the first half of the trading session, but both the S&P 500 and Nasdaq Composite indexes were modestly in the green. After closing on Tuesday just 1% off from a new all-time high, the S&P 500 may be poised for a breakout.
Looking ahead, Friday’s PCE report will be the biggest tool for investors looking to predict the Fed’s next moves.
Keep an eye on your inbox, as we’ll unpack that at the end of the week.
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