Interest rates may have fallen this year, if not for the uncertainty and higher costs created by President Donald Trump's tariff schemes.
Federal Reserve Chairman Jerome Powell told a House committee on Tuesday that the central bank likely would have "continued cutting" interest rates during the first half of 2025, but decided to hold rates higher as a hedge against the higher prices caused by tariffs. The Federal Reserve cut interest rates three times last year, but the central bank has not changed its benchmark interest rate since January and voted last week to hold those rates at the current level of 4.25 percent to 4.5 percent.
"If you just look at the basic data and don't look at the forecast, you would say that we would've continued cutting," Powell told the House Financial Services Committee on Tuesday. "The difference, of course, is at this time all forecasters are expecting pretty soon that some significant inflation will show up from tariffs. And we can't just ignore that."
