Central bank chair suggests external pressures won’t sway Fed policy
US president Donald Trump launched his latest broadside on Jerome Powell Wednesday morning, calling the Federal Reserve chair “stupid” and insisting the central bank would be wrong not to cut interest rates.
But the Fed opted to leave its overnight rate unchanged in its statement yesterday afternoon – and in the press conference later Powell appeared to dismiss the idea that external pressure from the president could sway Fed decisionmakers’ thinking on rates.
“From my standpoint it’s not complicated,” he said. “What everyone on the FOMC [Federal Open Market Committee] wants is a good, solid American economy with a strong labor market and price stability. That’s what we want. We think our policy is well positioned right now to deliver that and be able to respond in a timely way.
“The economy has been resilient and part of that is our stance, and we think we’re in a good place on that to respond to significant economic developments… Pretty much, that’s all that matters to us.”
Powell faced further criticism from the Trump administration after the Fed’s decision to hold rates steady, including from Federal Housing Finance Agency (FHFA) director Bill Pulte who called on X for his resignation as chair.
Two-year Treasury yields – which are especially sensitive to the immediate aftermath of news from the Fed – ticked upwards after Powell warned that tariff and inflation risks hadn’t eased.
Markets also reacted negatively to the Fed’s so-called “dot plot,” which illustrates Committee members’ thinking on the economic outlook. While two Fed rate cuts before the end of the year are still possible, decisionmakers now expect one less cut in 2026 and one less in 2027 – meaning rates will likely fall by a total of 100 basis points before the Fed calls it quits.
Watch Chair Powell’s statement from the #FOMC press conference:
— Federal Reserve (@federalreserve) June 18, 2025
Intro clip: https://t.co/10z8JQ6tvO
Full video: https://t.co/0YLymtGT5M
Press conference materials: https://t.co/lQAMHJpr6T
Fed stance finds mortgage industry support
The Fed’s hawkishness might mean the economy stays tightly wrapped for longer than expected, but it’ll be vindicated in that approach if it keeps inflation in check, according to Melissa Cohn (pictured below), regional vice president at William Raveis Mortgage.
She told Mortgage Professional America the central bank is correct not to bow to external pressure as it attempts to keep a lid on price pressures.
“Powell was very clear. He reiterated that the Fed has the dual mandate of trying to maintain full employment and controlling inflation and that right now, the biggest dragon they have to slay is inflation,” she said, “and as such, the Fed was not prepared to cut rates and may not be prepared to cut rates until the end of this year.”
Bringing rates lower now would have been premature, Cohn said, because there’s no indication yet of how tariffs will affect the economy in the coming months.
“If we had a much more dovish Fed they would cut rates – but they could inflict much further damage to our economy later on if they allow inflation to run away,” she said. “We still haven’t seen the true impact of whatever tariffs will be set in stone at some point this summer, and we’re still on pause. So how could the Fed possibly make a move?”
US economic outlook remains shrouded in uncertainty
Trump’s so-called “Liberation Day” tariffs, launched in the White House’s Rose Garden at the beginning of April, are the main current source of uncertainty for the US economy – but there are plenty of other imponderables at present, including the impact of the ongoing Iran-Israel conflict and the fate of his flagship tax legislation.
All that adds up to an economic outlook that doesn’t suggest rate cuts would be a wise current course of action for the Fed, according to Cohn.
“We don’t even know the economic environment related to tariffs that we’re going to be in. We don’t know what’s going to happen with the Big, Beautiful Bill,” she said.
“We don’t know what’s going to happen to oil prices. For them to cut rates [now] would be shortsighted. There are too many inflationary pressures out there for the Fed to say that they’re in an environment that would conduce them to a rate cut.”
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