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Jay Powell said a July interest rate cut was not “off the table” for the US Federal Reserve, in an apparent softening of his position that the central bank should wait until the autumn to start lowering borrowing costs.
The Fed chair, who has come under mounting pressure from President Donald Trump to slash rates, had signalled in recent weeks that any reduction before September was unlikely.
But asked on Tuesday whether a cut this month was out of the question, Powell responded: “I really can’t say. It’s going to depend on the data. And we are going meeting by meeting.”
“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 fall,” Powell said during a panel event at the ECB Forum on Central Banking in Sintra, Portugal.
The market largely brushed off Powell’s comments and focused instead on the strong jobs and manufacturing numbers released on Tuesday morning.
The two-year Treasury yield, which moves with interest rate expectations, rose to session highs following the data release, up 0.05 percentage points to 3.76 per cent. That suggested traders were taking off bets on rate cuts this year.
In the futures market, traders pulled back on bets of a July rate cut, despite Powell’s comments.
The president has piled pressure on Powell to lower rates, and repeatedly derided the Fed chair for his reluctance to accelerate cuts.
On Monday, Trump shared a handwritten note he had written to the Fed chair that compared the US to other central bank rates.
“Jerome — you are as usual ‘too late’,” Trump wrote. “You have cost the USA a fortune — and continue to do so — you should lower the rate — by a lot!”
The question of when to cut has opened a schism at the Fed between doves seeking lower borrowing costs to offset any softening of economic growth and hawks concerned that Trump’s tariffs will push up inflation.
Powell said on Tuesday that the Fed would have lowered rates more quickly if not for the president’s tariffs.
“We went on hold when we saw the size of the tariffs and where essentially all inflation forecasts for the United States went up materially as a consequence,” Powell said.
Christine Lagarde, the president of the European Central Bank, said that she and other central bankers in Sintra — the Bank of England’s Andrew Bailey, Bank of Korea’s Chang Yong Rhee and Bank of Japan’s Kazuo Ueda — would have done “exactly the same thing” as Powell.
Powell declined to say whether he wanted to stay on a governor after his term as chair ends. He is due to step down in May 2026 but can remain a governor until 2028.
Asked what his advice he would give to his successor, Powell said that the Fed needed to act “in a completely non-political way” to achieve its mandate. “We don’t take sides. We don’t play one side against the other. We stay out of issues that are really not our bailiwick.”
