Powell reiterated cautious stance, expects summer inflation to heat up, ignores Trump's rate cut request.

Federal Reserve Chairman Powell once again emphasized that before deciding whether to cut interest rates, the Fed will continue to assess the impact of tariffs on inflation, stressing that "waiting and understanding more" is the current cautious approach. His statement is equivalent to once again shelving the political demand of US President Trump for "immediate and substantial interest rate cuts". In Portugal, Sintra, attending the annual central bank forum of the European Central Bank, Powell said, "As long as the US economy remains robust, we believe that the prudent approach is to continue to observe and understand how the specific impact of tariffs will manifest." The day before, Trump personally wrote a letter to Powell, emphasizing that other central banks have cut interest rates substantially and the US should also follow suit quickly. While discussing with other central bank officials, Powell further pointed out that he expects price pressures from tariffs to appear in inflation data in the "coming months." "We are closely monitoring and expect to see an increase in inflation readings this summer." However, he also admitted that there is high uncertainty about the magnitude, timing, and sustainability of inflation, "It could be earlier or later, higher or lower than we expected." The current Fed is in a tug-of-war between forecasts and actual data. Despite Trump's continued pressure for loose policies, the Fed has remained inactive this year, partly because it wants to observe whether tariffs will bring sustained inflation. However, although Trump has imposed new tariffs on multiple trading partners, the related price increases have not yet appeared in macroeconomic data. Powell testified in Congress, saying, "If it weren't for models predicting that tariffs would push up inflation, based on economic data, we should have started cutting interest rates." The Fed's monetary policy meeting in June maintained interest rates unchanged, with the Federal Open Market Committee unanimously approving the decision. However, from the latest quarterly forecasts shown in the dot plot, there is a divergence within the Fed on the future path of interest rates: 10 officials predict rate cuts at least twice this year, 7 believe there will be no rate cuts by 2025, and two officials predict only one rate cut this year. Trump's tariff policy has brought significant uncertainty to the prospects of the US economy. Not only does he frequently change the specifics of tariff policies, but progress in pushing for trade agreements has been slow. These measures are widely believed to potentially increase inflation and drag down economic growth. However, from current data, the direct impact of tariffs on prices or the labor market is still not clear. Trump and his team also use this to urge the Fed to cut interest rates as soon as possible. It is worth noting that two Fed governors appointed by Trump, Waller and Bowman, both support starting to cut interest rates at the meeting this month. They stated that the current economic data is stable, the job market is strong, and there is already some room to lower policy rates.