Don't expect interest rates to fall any time soon.
Federal Reserve Chair Jerome Powell told a Senate Committee Tuesday that with a strong job market and with inflation still elevated, he and his colleagues "do not need to be in a hurry" to cut interest rates.
Powell also fielded questions about President Trump's economic policies and the Fed's own bank supervision — and as usual, the Fed chair tried to steer clear of politics.
In his semi-annual report to Congress, Powell noted that the central bank had lowered its benchmark interest rate by a full percentage point last year. Further cuts will likely have to wait until inflation cools further or until there's a notable softening of the job market.
Trump and inflation
The Fed also faces a big uncertainty: Trump's tariff policies could put more upward pressure on prices, making it harder for the central bank to lower rates. On Monday, Trump ordered 25% tariffs on all imported steel and aluminum. He's also threatened widespread taxes on other imports.
Powell declined to comment on the merits of the president's trade policy, saying that's for Congress and the administration to work out.
Sen. Jack Reed, D-R.I., wondered if Trump would be equally careful about staying out of the Fed's lane.
"Just this weekend, the president removed the board of the Kennedy Center and made himself chairman," Reed noted, referring to Trump's announcement last weekend. "What would you do if the president tried to remove a member of the Federal Reserve board?"
Powell insisted that's "pretty clearly not allowed under the law."
There are currently no vacancies on the Federal Reserve's board of governors, so Trump's power to re-shape the central bank is limited. He will get his chance down the road, however. Powell's own term as chair ends in May of next year.
'Debanking' in focus
Republican senators also quizzed Powell about complaints that the Fed and other bank regulators had discouraged banks from working with some businesses — especially crypto businesses — that were out of political favor during the Biden administration.
"If it's legal in America to do business, we should do our part to make sure that they're banked," said Sen. Tim Scott, R-S.C., who chairs the banking committee.
Powell said he's also been struck by complaints about "debanking," and promised the Fed will take a "fresh look" at its bank supervision manual.
Democrats sound alarm about CFPB
While most bank regulation aims to ensure the safety and soundness of the financial system, one agency's mission is to look out for consumers. Sen. Elizabeth Warren, D-Mass., led the push to set up the Consumer Financial Protection Bureau after the Great Financial Crisis — and she's furious that the Trump administration has effectively shuttered the bureau, saying the move leaves financial customers unprotected.
"No more cop on the beat, looking out for your grandma whose bank account has just been taken over by a scammer," Warren said. "No more cop on the beat looking out for people getting ripped off by giant credit card companies that are charging illegal junk fees."
Warren urged Powell not to be an "accomplice" to that shutdown by allowing the administration to choke off funding for the watchdog agency. The consumer bureau was set up to receive automatic funding from the Fed, in an effort to prevent meddling by members of Congress.
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