Fed Reserve Chair: Tariffs Are Reason Why Interest Rates Aren’t Lower Yet

This has not yet been the time for the U.S. central bank to lower interest rates, Federal Reserve Chair Jerome Powell said on Tuesday. Powell told central bankers at a conference in Portugal that the Fed may have lowered borrowing rates already but hasn’t yet due to President Donald Trump’s higher tariffs on foreign products.

Fed Holds Off on Rate Cuts Due to Trump Tariffs

"In effect, we went on hold when we saw the size of the tariffs, and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs," Powell said.

Powell said that the federal policymakers are now waiting to see what impact Trump’s ever-changing trade policies will be. Since taking office in January, Trump has publicly threatened higher tariffs numerous times on some of U.S. trade partners, only to retreat later.

"So, we didn't overreact,” Powell explained. “In fact, we didn't react at all. We're simply taking some time."

Inflation Concerns Loom Over U.S. Producers and Consumers

Powell maintains that tariffs could lead to higher inflation for American producers and consumers in the months ahead. Some American buyers tried to plan ahead by purchasing supplies and goods in bulk before higher tariffs went into place. But that could only be a temporary action to less the inevitable higher prices that could eventually follow if higher tariffs go into effect – and stay in place.

"As long as the economy is in solid shape, we think the prudent thing to do is to wait and see what those effects might be,” Powell said.

RELATED: Kent Smith, former president of the Iowa Chapter of the American Society of Farm Managers and Rural Appraisers, told American Farmland Owner that he thinks several factors could push down farmland values a little in 2025.