After a month of relentless pressure from Trump to cut rates, the Powell-led Fed held the line again today (despite two dissenters).
That's seven consecutive months on hold.
And in the press conference, Powell dug in. This wasn't about signaling a September rate cut and resumption of the easing cycle. It was closer to a counterattack on the Trump pressure campaign.
A month ago, Powell said they expected tariffs to show up in goods inflation over the summer. The Fed’s messaging was centered on “uncertainty.” They were in wait-and-see mode.
Today, not only did he say the tariffs are definitely in the data, he implied that the tick higher in inflation would have been worse if not for the Fed's restrictive policy stance.
He explicitly said, "we have three or four tenths" of core inflation, from tariffs. And he said, "you could argue we are looking through goods inflation by not raising rates (!)."
So, Jerome Powell sat in a room for two days with two colleagues that made the case to cut rates today, and still came out with this message: Tariffs are a new source of inflation. The current restrictive stance is preventing a worse inflation outcome. No pivot.
With that, the ball goes back into Trump's court. Will he escalate the threats to fire Jerome Powell? Likely.