Fed Signals Rate Cut Delays Beyond July As They Speculate On Inflation

High interest rates the last few years have caused a lot of trouble in the United States. Home ownership seems unattainable now, and it has kept inflation caused by bad Biden-era policies to sit at some of the highest levels in four decades. But things are turning in the right direction with President Trump, as inflation has steadily crept down since he re-took office in January.

It has fallen enough where there was speculation the Federal Reserve might cut rates at their latest meeting in June. The case for a cut was strong and is only getting better. But once again, Chairman Jerome Powell refused to do so, citing they are studying the potential effects of tariffs. They have signaled that any rate cuts would come well after their July meeting. Speaking to Congress this week, Powell said they expect inflation to rise. Even as all cases show right now that tariffs will not have any major impacts.

Economist E.J. Antoni says this is a fine bit of hypocrisy from Powell and the Fed.

"Tariffs are just a tax, essentially...where was the concern when Biden imposed taxes on energy? Should that have caused inflation? Especially since energy is in everything we do, and everything we buy," he says.

Import tariffs do not have the largest impact on daily life, and they encourage to produce in America. Which in turn, would make things cheaper, and bring infltion down. So the idea it will be a detiment to the economy is unfounded. Even if it causes slight inflation for a short period.

The lowering of rates though is not just hurting simple things like buying a home. It has far ranged effects, and the longer Powell waits to act, the worse it gets.

"It also affects the treasury market...this will make it more expensive for the treasury to borrow, and therefore, will be a in increased cost for taxpayers if we are at a point where rates should be falling, but the Fed keeps them artificially high," says Antoni.

The Fed claims to be bipartisan, and for most of history they have been. Powell reiterated to congress their sole focus is the impact of inflation the Fed forecasts through the end of the year.

But there is politics at play in this case. President Trump and Powell do not like each other, and both have made that abundantly clear publicly. So, like dangling a carrot, Powell will holdout for as long as he pleases.

"I would not be surprised if as long as he is at the helm of the Fed, interest rates stay exactly where they are now," Antoni says.

Economic projections have shown the potential for two rate cuts later this year. But until Powell acts, we are stuck with high rates and low hopes.