Powell Stalls, Tariffs Loom, and Consumers Turn Gloomy

Federal Reserve Chair Jerome Powell told the House Financial Services Committee on Tuesday that the central bank is in no rush to move interest rates, even as fresh tariffs cloud the outlook and inflation remains sticky. “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance,” he said while presenting the Fed’s semi-annual Monetary Policy Report. Investors quickly digested the wait-and-see message—and ongoing geopolitical jitters—by bidding spot gold to an intraday high of $3,324 per ounce. Meanwhile, the Conference Board’s Consumer Confidence Index sank to 93.0 in June, highlighting a widening gap between policymakers’ optimism and Main Street’s anxiety.

Powell’s report painted a mixed picture. Real GDP rose a healthy 2.5 percent in 2024 but “edged down” in the first quarter as firms front-loaded imports before tariff hikes took effect. Even so, private domestic final purchases climbed at a 2.5 percent annual rate, supported by a rebound in business spending on equipment and intangibles. Payrolls grew by an average 124,000 per month through May, nudging the jobless rate to 4.2 percent—low by historical standards but no longer at rock bottom. Headline PCE inflation cooled to 2.3 percent year-over-year in May, yet the stickier core gauge still sits at 2.6 percent, above the Fed’s 2 percent target.

Despite those figures, the Federal Open Market Committee has kept its federal-funds target locked at 4.25 percent–4.50 percent since January and even slowed quantitative tightening in April. Powell warned lawmakers that this year’s tariff hikes are “likely to push up prices and weigh on economic activity,” adding that the Fed would act if a “one-time” price shock risked becoming entrenched. Whether officials can truly fine-tune that outcome remains debatable: history shows price controls, tariffs, and reactive rate moves often compound, rather than cure, inflationary pressures.…