WASHINGTON — House Republicans struck a mostly cordial tone with Federal Reserve Chairman Jerome Powell at a hearing at the House Financial Services Committee.
Trump, ahead of the
"What a difference this would make. If things later change to the negative, increase the Rate [sic]," Trump wrote. "I hope Congress really works this very dumb, hardheaded person, [sic] over. We will be paying for his incompetence for many years to come."
Powell faced questions from House Financial Services Committee Chairman French Hill, R-Ark., and the panel's Vice Chairman Bill Huizenga, R-Mich., over his comments on tariffs and inflation — a key point of contention between Trump and Powell on rate policy.
"So are tariffs in your lane, but a huge fiscal spending by the Biden administration not in your lane?" Huizenga asked during one exchange.
Powell said that he and other Fed members are not commenting on tariff policy, but rather on the inflationary effects of tariffs that are important to how the Fed looks ahead and decides interest rates.
"We are not commenting on tariffs," Powell said. "What our job is, is inflation — keeping inflation under control."
Powell added that the economic impact of Trump's tariff policy — whatever it ultimately may be — are likely inflationary.
"All professional forecasters I know on the outside do expect a meaningful increase in inflation over the course of this year," he said.
But Powell, who was originally appointed by Trump during his first term and reappointed under President Joe Biden, has a
Powell's views on tariffs have the potential to pose a political problem for Trump and Republicans, who partially campaigned on promised to bring down high inflation. But if inflation remains high, the Fed is unlikely to cut its benchmark interest rate, which would have a further inflationary effect — but Powell said how severe and enduring those effects will be is hard to know in advance.
"The effects of tariffs will depend, among other things, on their ultimate level," Powell said. "Expectations of that level, and thus of the related economic effects, reached a peak in April and have since declined. Even so, increases in tariffs this year are likely to push up prices and weigh on economic activity."
Powell also addressed questions about the Fed's independence in the wake of a series of social media posts from Trump and others in the Trump administration.
Powell, in response to a question from Rep. Josh Gottheimer, D-N.J., on President Donald Trump's pressure on Powell to slash interest rates, said that he will "live with the consequences" of any pushback he receives from the President.
"We're focused on one thing, that is we want to deliver a good economy for the benefit of Americans and for the health of the American people," Powell said. "That's it. Anything else is kind of a distraction."
In response to a question by Rep. Maxine Waters, D-Calif., Powell said that his priority is that he and the Fed "do our jobs." He said that he thinks he is "fully protected" from removal by the president under the law,
"I think that I have a job that I'm sworn to do," Powell said. "That's what we think about, what's the right thing."
Powell also said that he is not yet concerned that economic indicators published by the federal government — such as inflation metrics published by the Bureau of Economic Analysis or labor participation rates published by the Bureau of Labor Statistics — are unreliable or hurting the central bank's ability to manage interest rates. But Powell said he does fear that he is concerned that the quality of that data could decline further, which he said would hinder not only the Fed but all businesses and policymakers who rely on that data to make informed decisions.
"I wouldn't say I'm concerned about the data today, although clearly there has been a very mild degradation of the scope of the surveys and things like that — but I would say the direction of travel is something I'm concerned about," Powell said. "Measuring the U.S. economy carefully and well is a project that's been going on and we've been getting better at it for 100 years or more. It's really important, not just for the Fed, but for Congress — and for businesses, frankly — to know what really is going on in the economy. What's happening? Is growth high, is it low? All of those sorts of things."
Powell also struck a conciliatory note in response to a question from Rep. Andy Barr, R-Ky., regarding the Fed's efforts to revise the supplemental leverage ratio. Powell said the purpose of the changes being considered is to make the capital requirement a backstop rather than a binding constraint for banks, particularly those engaged in Treasuries trading.
"I've always thought that it would be better if we had a leverage ratio that … was a backstop rather than the binding thing, and that's what this proposal is going to do," Powell said.
Kyle Campbell and John Heltman contributed to this report.
