Federal Reserve Chair Jerome Powell stated that interest rate cuts were likely on the table for this year, but the tariff measures introduced under former President Donald Trump prompted the central bank to pause. Powell explained that these tariffs led to a noticeable rise in inflation expectations across the U.S., making a cautious approach more appropriate.

Speaking during a panel discussion with central bank officials in Portugal, Powell said, “We effectively paused rate cuts when we saw the magnitude of the tariffs and their potential effects. Inflation expectations surged, but we refrained from overreacting and did not take immediate action.”

He added that the Fed is deliberately taking its time to assess the full impact of the tariffs, stating, “As long as the U.S. economy remains strong, the prudent course is to wait and observe how these effects unfold. So far, they haven’t materialized significantly.”

Powell noted that most Federal Open Market Committee (FOMC) members still expect conditions to warrant rate cuts later this year, but emphasized that such decisions will depend heavily on incoming data—particularly inflation trends and labor market performance.

“We’re watching carefully for any signs of unexpected weakness. We see a gradual slowdown, but nothing conclusive yet. These are the factors we’ll be monitoring. As I mentioned, a majority of us believe it could be appropriate to begin cutting rates during one of the remaining four meetings this year,” Powell said.