Powell tells Senate Fed will weigh tariffs as a risk while aiming to sustain jobs and bring inflation to 2%

Federal Reserve Chair Jerome H. Powell told the Senate Banking, Housing, and Urban Affairs Committee on Tuesday that the Fed remains focused on its “dual mandate goals of maximum employment and stable prices for the benefit of the American people.”

Powell said incoming economic data show the U.S. economy is ‘‘in a solid position’’ with unemployment near what the Fed considers maximum employment and inflation ‘‘running somewhat above our 2% longer run objective.’’ He told senators that private domestic demand remains solid even as measurements of gross domestic product have been complicated by recent swings in net exports.

Why it matters: Powell repeatedly framed tariffs announced this year as a source of uncertainty that could push up prices and slow activity. He said the Fed does not take a position on trade policy’s merits but must prepare for tariff effects on prices and on expectations that can themselves influence inflation over time.

Powell: policy will be data-dependent

"We will continue to determine the appropriate stance of monetary policy based on the incoming data, the evolving outlook and the balance of risks," Powell said. He emphasized that the Fed has held the federal funds target range at 4.25%–4.5% and is ‘‘well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy rate.’’

On tariffs specifically, Powell repeated that outcomes could differ: in some scenarios tariff moves produce a one-time increase in price levels, in others the effects could be more persistent and raise inflation expectations. "Avoiding that outcome will depend on the size of the tariff effects, how long it takes for them to pass through fully into prices and ultimately on keeping longer term inflation expectations well anchored," he said.

Senators press on fiscal policy, redistribution and near-term effects

Ranking Member Sen. Elizabeth Warren (D-Mass.) framed the current administration's trade and tax proposals as likely to raise costs for many Americans and increase federal deficits. "This isn't tax policy. It's economic warfare against the American people," Warren said, criticizing recent tax and trade measures and warning they could raise consumer costs and slow growth.

Powell declined to take positions on particular fiscal proposals but reiterated that the Fed treats fiscal policy as exogenous to its month‑to‑month decisions. "We do not look at federal financial policy and deficits as something that affects our month to month, monetary policy decisions," he said, while acknowledging in the abstract that fiscal policy can affect inflation over longer horizons.

Outlook: cautious, data-driven approach

Across questioning, Powell said the Fed is closely monitoring consumer and business sentiment, wage and inflation measures, and how tariffs translate into consumer prices. He noted that measures of longer‑term inflation expectations remain broadly consistent with the 2% objective but warned that both upside and downside risks remain. He also said the Fed will continue reducing its holdings of Treasury and agency mortgage‑backed securities while calibrating the transition to ‘‘ample’’ reserve balances.

What’s next: Powell said the FOMC would continue to evaluate incoming data and that policy changes will be guided by that information. He declined to give a timetable for rate cuts, saying the committee is ‘‘in a position of wanting to take our time and make a smart decision as we see how this unfolds."