The latest policy decision was made by a 9-2 vote, which passes for a split outcome at the consensus-driven central bank, with two Fed governors dissenting for the first time in more than 30 years.
Trump has given Powell the pejorative nickname “Too Late” for his refusal to cut rates, but the Fed chief on Wednesday said his hope was to be right on time when the decision is made to lower borrowing costs – neither moving so soon that inflation reemerges, or waiting so long that the job market slides and the unemployment rate rises.
Indeed, Powell said the fact that the Fed isn’t discussing rate hikes could be seen as a willingness to overlook some of the expected impact of tariffs.
“If you move too soon, you wind up not getting inflation all the way fixed … That’s inefficient,” Powell told reporters. “If you move too late, you might do unnecessary damage to the labour market … In the end, there should be no doubt that we will do what we need to do to keep inflation controlled. Ideally, we do it efficiently.”
The data since the Fed’s Jun 17 to 18 meeting has given policymakers little reason to shift from the “wait-and-see” approach they have taken on interest rates since Trump’s Jan 20 inauguration raised the possibility that new import tariffs and other policy shifts could put upward pressure on prices.
Inflation is about half a percentage point above the Fed’s 2 per cent target and has shown signs of increasing as prices of some heavily imported goods begin to rise, a process Powell said is expected to continue.
As of June, Fed policymakers at the median expected inflation to rise further and end the year at about 3 per cent.
New inflation data for June will be released on Thursday, and a key jobs report for the month of July will follow on Friday, part of the data Powell said policymakers will evaluate as they debate a possible rate cut in September.
Earlier on Wednesday, the US government reported that economic growth rebounded more than expected in the second quarter, but declining imports accounted for the bulk of the improvement and domestic demand rose at its slowest pace in two-and-a-half years.
