Federal Reserve Chair Jerome Powell testified before the Senate Banking Committee, stating that there is no urgency for the central bank to decrease interest rates further.
Chip Somodevilla/Getty Images North America

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Chip Somodevilla/Getty Images North America

Don’t anticipate a decline in interest rates in the near future.

In his address to the Senate Committee on Tuesday, Powell noted a robust job market and persistent inflation, asserting that there’s no immediate requirement to expedite interest rate reductions.

He also responded to inquiries regarding President Trump’s economic policies and the Fed’s regulatory practices, opting to remain neutral in political discussions.

During his semi-annual report to Congress, Powell highlighted a prior reduction of the benchmark interest rate by a complete percentage point over the previous year. Future reductions, he noted, are contingent upon a significant decrease in inflation or a notable slowdown in the employment market.

Trump and Inflation Concerns

The Fed grapples with uncertainties surrounding Trump’s tariff strategies, which may escalate price pressures, complicating efforts to lower rates. Recently, Trump imposed 25% tariffs on all imported steel and aluminum and hinted at broader tariffs on additional imports.

When asked about Trump’s trade policies, Powell refrained from commenting, stating it is a matter for Congress and the administration to resolve.

Senator Jack Reed questioned Powell about Trump’s approach to the Federal Reserve’s independence. Reed referenced Trump’s recent actions regarding the Kennedy Center and queried how Powell would respond if Trump attempted to dismiss a Federal Reserve board member.

Powell affirmed that such an action would contravene established laws.

Currently, there are no openings on the Federal Reserve’s board of governors; however, Trump’s opportunity to influence the institution may arise later as Powell’s term ends in May next year.

Concerns Around ‘Debanking’

Republican senators probed Powell about allegations that the Fed and other regulatory bodies have deterred banks from engaging with certain industries, particularly those associated with cryptocurrency, amid the Biden administration.

Senator Tim Scott expressed the view that if a business is legal in the U.S., the banking sector should support its operations.

Powell acknowledged the complaints regarding “debanking” and committed to a comprehensive review of the Fed’s supervision manual.

Democrats Raise Alarm About CFPB

Despite many regulations designed to secure the financial system’s integrity, the Consumer Financial Protection Bureau (CFPB) is charged with safeguarding consumers’ interests. Senator Elizabeth Warren, who was instrumental in establishing the CFPB following the 2008 financial crisis, criticized the Trump administration for effectively dismantling the agency.

Warren emphasized that without the CFPB’s protective oversight, vulnerable consumers are left unguarded against predatory practices.

She urged Powell not to become an accessory to the agency’s potential disbandment by allowing funding constraints from the administration.