Powell didn’t just refuse to deliver a rate cut—he also hinted a raise could have been on the cards

Economy·fed interest ratePowell didn’t just refuse to der a rate cut—he also hinted a raise could have been on the cardsBy Eleanor PringleBy Eleanor PringleReporterEleanor PringleReporterEleanor Pringle is an award-winning reporter at Fortune covering news, the economy, and personal finance

Eleanor previously worked as a correspondent and news editor in regional news in the U.K

She her journalism training with the Press Association after earning a degree from the University of East Anglia.SEE FULL BIO Federal Reserve Chairman Jerome Powell answers questions from reporters ing the regular Federal Open Market Committee meetings at the Chip Somodevilla - Getty ImagesFed Chair Jerome Powell held interest rates steady yesterday and signaled a cautious apach to cutting, despite growing dissent within the Fed and market hopes for a September move downward

While acknowledging tariff-driven inflation, Powell emphasized that more data is needed before adjusting policy

In a move that everyone was expecting, U.S

Federal Reserve Chairman Jerome Powell disappointed Donald Trump again yesterday by refusing to cut the base interest rate

Indeed, a hawkish Powell even used the dreaded r-word (“raise”)—having suggested he is responsive enough to calls to “look through” tariff-induced inflation by not increasing interest rates, a notion which ly would have sent the Oval Office into a fury

This represents the highest level of friction within the FOMC for more than 30 years

But despite the pressure—both from within the Fed and externally—Powell struck a cautious tone on cutting

For some time analysts have pencilled in a cut in September, the next meeting of the FOMC. “Higher tariffs have begun to show through more ly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen,” Powell told reporters in a news conference ing the meeting. “A reasonable base case is that the effects on inflation could be short-d—reflecting a one-time shift in the price level

But it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed.” To the point of a one-time price shift, Powell said the FOMC is heeding advice to not letting tariff-related inflation cloud the picture of the fundamentals of the economy

But while investors had used this argument to lobby for a cut, Powell said the fact he is holding rate steady is evidence of this pragmatism, saying the FOMC is “a bit looking through goods inflation by not raising rates.” Tabling a rate rise is quite the opposite of what many investors and economists are hoping for, but Powell doubled down: “The economy is not performing as though restrictive policy were holding it back inappriately.” Investors, therefore, have been left wondering what it will take for the FOMC to cut. “Fed Chair Powell was much more hawkish than we were expecting at his press conference,” Bank of America’s macroeconomics team wrote in a note seen by Fortune. “He was asked several questions on what it would take for the Fed to cut in September

In response, Powell made it that the onus is on the data to justify a September cut.“ They added: “To be , hikes are still very unly, but Powell argued that the ‘efficient’ way of balancing risks to the dual mandate is to stay on hold because cutting too early introduces the risk of having to raise rates again later.” were minded to agree with BofA on its take of a hawkish Powell

Equity fell ing the announcement while treasury yields rose

Elsewhere, UBS’s Paul Donovan said may be seeing through the FOMC dissenters, explaining in a note this morning: “Fed Chair Powell tried to present the two dissenting views as being rationally based, but investors are bound to suspect that the rationale amounted to little more than an excited jumping up and down and shouting ‘pick me, pick me’ in the general direction of the White House

The press conference gave a slightly hawkish tone in anticipating the trade tax inflation yet to come.” Holding on for September Despite Powell’s speech eroding some of the confidence in a September cut, analysts are tending to hold on to the hope that a cut will come at the next meeting the month after next

The Fed chairman gave them some reason to hope, for example saying: “We are also attentive to risks on the employment side of our mandate.” “The expectation for this meeting wasn’t a rate cut, and I don’t think there would have been much upside to Powell signaling that one was imminent,” wrote Elyse Ausenbaugh, Head of Investment Strategy at J.P

Morgan Wealth Managemen, adding: “The data, as it stands today, isn’t yet calling for one, and a lot could change between now and the FOMC’s next decision point in September.” wise, Goldman Sachs’s chief U.S. economist David Mericle wrote in a note to clients seen by Fortune: “Neither [Powell’s] statement nor the press conference vided any direct hints the lihood of a cut in September

In response to a question the two-cut baseline in the June dots, Powell acknowledged but declined to endorse it, saying that he would not want to substitute his own judgment for the views of other participants, especially with two more rounds of employment and inflation data still to come before the September meeting.” That being said, Goldman continues to forecast three cuts in 2025: In September, October and December, ed by two more in 2026 to bring the rate down to 3% to 3.25%

Mericle added: “Powell’s s today suggest to us that a September cut is certainly still up for debate but not that labor market softening over the next two months is necessarily required, and we continue to see multiple paths to a cut.” UBS’s global wealth management chief investment officer, Mark Haefele, is minded to agree with a September rate cut—citing the Job Openings and Labor Turnover Survey (JOLTS)revealing declines in both openings and hires, as well as a lower quits rate

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