Powell Defies Pressure: Fed Holds Rates Firm in High-Stakes Testimony

Jerome Powell stares down inflation hawks as the Fed plays chicken with rate cuts.

No pivot, no panic—just a central bank clinging to its 'wait-and-see' playbook while markets twitch.

Wall Street's rate-cut bets crash into Fed's stone wall. Again.

(Bonus jab: At least someone's holding steady—unlike crypto traders during a 2% CPI swing.)

Powell testifies as Fed holds rates steady despite pressure

On Tuesday, Powell told the Senate Banking Committee that the Fed is not ready to cut rates yet. He pointed to the potential inflationary effect of Trump’s tariff policies. “Most forecasters expect a fairly substantial wave of price increases to come through to the consumer,” Powell said.

While many Republicans in the Senate pushed him to act fast, Powell stayed firm. “If we make a mistake here, people will pay the cost for a long time,” he said.

The Federal Open Market Committee voted unanimously last week to keep interest rates where they are, marking the fourth straight meeting with no changes. Powell emphasized that the majority of the committee still expects rate cuts before year-end but said, “It’s just something you want to approach carefully.”

Fed officials are split. Vice Chair Michelle Bowman, who was appointed by Trump, said Monday the bank should act quickly to cut rates and help the labor market. Christopher Waller, another Trump appointee, agreed and called the inflation from tariffs a “one-off” event. 

Chicago Fed President Austan Goolsbee joined in, suggesting borrowing costs could be lowered again if tariffs don’t push inflation up. But Powell argued the opposite: that tariff-driven price hikes could begin this summer, and rushing to cut rates could restart inflation.

Trump allies ramp up attacks as debt and tariffs dominate

Commerce Secretary Howard Lutnick used his platform Wednesday to repeat Trump’s message. “Jerome Powell – your job is to help Americans, not hurt them, so do your job and CUT our absurdly high interest rates at your next meeting,” Lutnick posted on X.

In a follow-up post, he doubled down: “That’s why President Trump calls Powell a loser. Because Powell WOULD rather ignore the tariff revenues and keep US rates the highest in the world (for a first-class country) because he’s afraid to act.”

Senator Bernie Moreno from Ohio joined the pile-on, accusing Powell of trying to sabotage Trump’s trade agenda. “Nobody in this chamber has that kind of power to have a $400 billion impact on this economy, on our deficit,” Moreno said. “And I just think that you should consider whether you’re really looking at this from a fiscal lens or a political lens, because you just don’t like tariffs.”

As Trump urges Congress to pass a tax cut bill that would tack on another $2 to $4 trillion to the already $36 trillion national debt, Republicans want the Fed to act like a partner. Trump and GOP lawmakers say the only way to deal with this debt is to slash interest rates and reduce borrowing costs. Meanwhile, the US Treasury is running out of room to avoid a default unless Congress agrees to raise the debt ceiling again.

Trump eyes replacements as legal limits block firing Powell

Despite legal restrictions preventing Trump from firing Powell outright, he has threatened to do it several times over the years. Analysts believe Trump will simply wait out Powell’s remaining time and put someone new in place once the term expires.

The president confirmed Wednesday he’s already speaking to possible replacements, including Treasury Secretary Scott Bessent, Fed Governor Christopher Waller, and former Fed Governor Kevin Warsh.

“I know within three or four people,” Trump said again on Wednesday. “I mean, he goes out pretty soon, fortunately, because I think he’s terrible.”

The thing is, though, no matter how hard he tries, we know Trump will never get Powell to bite the bait. The man has historically been classy, choosing to avoid speaking about anyone in public, not just the president, since the beginning of his career.

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