[NEW YORK] US Federal Reserve chair Jerome Powell on Wednesday (Jun 25) said the US central bank is still struggling to determine the impact of tariffs on consumer prices.
“The question is, who’s going to pay for the tariffs?” Powell said in response to a question during his testimony before the Senate Banking Committee. “How much of it does show up in inflation. And honestly, it’s very hard to predict that in advance.”
Powell’s second day of testimony on Capitol Hill this week comes after Fed officials left interest rates steady on Jun 18. Policymakers are facing even more pressure from US President Donald Trump to lower borrowing costs in the wake of weaker-than-expected inflation readings.
Two Fed governors, Christopher Waller and Michelle Bowman, have signalled they would be open to lowering rates as soon as July if inflation remains contained.
But Powell on Tuesday repeated his message that officials need not rush to lower rates, citing the strong economy and uncertainty over how tariffs will affect inflation. Powell told the House Financial Services Committee that recent economic data is backward looking and many economists expect “a meaningful increase in inflation” over the course of this year due to tariffs.
As with the colleagues in the House on Tuesday, Senate Republicans on Wednesday generally refrained from fulfilling Trump’s request, posted on social media, that Congress “really works this very dumb, hardheaded person, over”.
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Senator Bernie Moreno of Ohio was an exception.
“We got elected by millions of voters. You got elected by one person, and he doesn’t want you to be in that job,” Moreno said, referring to the president, who nominated Powell for the chair position in 2017. “And you are costing this government US$400 billion a year by refusing to lower interest rates.”
Trump has recently focused on the cost of interest rates to the government in servicing the country’s debt.
“Lavish renovations’
Powell also responded to questions from committee chair Tim Scott about reported cost overruns connected to the refurbishment of two Fed buildings in downtown Washington. Scott and five other Republicans on the panel released a letter they’d delivered to Powell before the hearing asking about reports of “lavish renovations” to Fed facilities and about the “politicisation” of the central bank.
Without refuting Scott’s assertion that expenses for the project had ballooned from an estimated US$1.9 billion to US$2.5 billion, Powell said a number of media reports about materials and amenities being installed were false.
“There’s no VIP dining room, there’s no new marble,” Powell said. “There are no special elevators – there’s just, there are old elevators that have been there – there are no new water features, there’s no beehives and there’s no roof terrace gardens.” BLOOMBERG
