Fed Holds Back on Rate Cuts as Powell Waits for Key Data

In his latest testimony before Congress on 24 June, Federal Reserve Chair Jerome Powell made it clear: the Fed is in no rush to cut interest rates. He emphasized that decisions will depend on key data from June and July, with a particular focus on inflation and labour market figures.

The message? Patience.

Inflation Still Above Target

Powell acknowledged that inflation has come down significantly, but remains slightly above the Fed’s 2% target. At the same time, the labour market appears solid, with May’s unemployment rate at 4.2%. He noted that the job market is not currently adding significant inflationary pressure.

Q1 Growth Slows, Rates on Hold

US economic growth slowed in the first quarter of 2025 due to fluctuations in exports and imports. However, the Fed has kept its benchmark rate steady at 4.25%–4.50% since the start of the year.

The central bank also continues to reduce its balance sheet by gradually trimming holdings of Treasuries and mortgage-backed securities — a move aimed at supporting financial market stability and controlling inflation.

Tariff Concerns Remain

On the issue of tariffs, Powell said the Fed is monitoring their potential effects on both prices and economic activity. While the full impact on inflation remains uncertain, the Fed is awaiting further data before adjusting its monetary policy.

He also underlined the importance of keeping long-term inflation expectations stable, and preventing temporary price increases from becoming persistent.

Balancing Act Continues

Despite external pressure, Powell maintained the Fed’s commitment to its dual mandate: achieving price stability and maximum employment. While progress has been made in bringing down inflation, the Fed has not yet reached its target. The effects of tariffs on inflation remain unclear as well.

For now, Powell signalled that the Fed will continue to move cautiously, letting incoming data guide its next steps.

Bottom Line

The Fed is holding steady. As inflation remains above target and growth data remains mixed, the central bank appears committed to a careful, data-driven approach. Any future rate cuts will likely depend on clear evidence that inflation is sustainably moving toward 2%, without destabilizing the labour market or financial system.