It was understood that the tariffs were influencing the monetary policies of the Federal Reserve, but the chairman of the Fed confirmed it clearly. Jerome Powell on the occasion of the governors' round table on monetary policy at the Sintra Forum, Portugal. In essence, Powell implied that without the tariffs imposed by President Donald Trump, which also generated confusion because they were postponed and increased or reduced every week, the expected interest rate cut would have already happened: "Inflation in the United States - said the number one of the Federal Reserve in Sintra - fell to 2,3%, but when we saw the size of the tariffs we opted for a wait-and-see position, also considering that in the meantime all the inflation projections have risen". In short: we would like to cut rates, essentially it is Trump's fault if we haven't already done it.
Rate Cuts Within the Year and the Response to Trump
But in any case, Powell implied, it will happen soon: “A solid majority of the Federal Open Market Committee agrees that it is appropriate to cut interest rates in the second half of the year. It will obviously depend on the data and we will look in particular at what will emerge with respect to the trend of inflation and we will look at any signs of weakness from the labor market”. The clash between the financial institution and the White House has been notoriously bitter for some time, but in recent days the pressure on Powell has increased again, after Trump had formally urged the chairman of the Federal Reserve to leave office before the end of his mandate, in 2026. The tycoon criticized Powell for making the United States one of the countries with the highest interest rates in the advanced world, with the current 4,5%: “He should be ashamed”, the American president had written on social media. Powell also had to respond to this provocation in Sintra: “I remain focused on my work,” he said. “The important thing is to hit our goals and 2025 is a very important year, in which many things are happening.”
Lagarde's words
Also supporting Powell at the Portuguese summit was ECB President Christine Lagarde, who on the anti-Trump stance confessed that she "would make the same moves" as her colleague. Lagarde also commented on the moment of strength of the euro against the dollar, due in her opinion not only to market conditions but above all “to the strength of the European economy”. On Monday, the head of the European Central Bank had said that the global situation of “uncertainty is likely to make inflation more volatile. During the recent surge in inflation, shocks played a much larger role in increasing prices than in the previous two decades. We are now going through a process of disinflation but we must continue to be extremely vigilant. Inflation is now at 2% and this is the goal that we had, and this is the projection that our staff indicates for the medium term, which is exactly what we had foreseen. So I don't say mission accomplished, but I say target achieved, and I think we should start recognizing that."
