Powell testifies at Senate hearing at 10 AM ET.

Powell testifies at Senate hearing at 10 AM ET.

Federal Reserve Chair Jerome Powell is set to resume his two-day testimony before Congress on Wednesday, with a focus on tariffs and inflation. Powell will appear before the Senate Banking Committee, following his testimony before the House Financial Services Committee on Tuesday.

Powell is expected to reiterate the Fed's concerns that rising import taxes, particularly those set to take effect on July 9, could lead to higher inflation beginning this summer. He is also anticipated to stress that the Fed will not be comfortable cutting interest rates until it sees if prices do begin to rise and whether that process shows signs of becoming more persistent [1].

The Fed has held its benchmark interest rate steady in the 4.25% to 4.5% range since December, despite President Donald Trump's demands for immediate and deep rate cuts. Economic projections released by the Fed last week showed a divide among policymakers regarding the potential impact of tariffs on inflation. While some officials expect the Fed to cut rates by the end of the year, others remain cautious, with seven of 19 policy makers seeing no rate cuts at all this year [2].

Powell's testimony comes amid growing divisions within the Fed. Two top officials, Fed Governors Chris Waller and Michelle Bowman, both appointed by Trump, have suggested an interest-rate cut in July. They argue that the rise in inflation from tariffs will be short-lived and mostly fade away by next year. However, Powell has given no sign of when U.S. interest rates will be reduced again, setting up a potential clash with President Trump's staunchest Republican allies [3].

Investors currently expect the Fed to cut rates at its September and December meetings, but hold rates steady at its next meeting on July 29-30. Powell's testimony is scheduled to start at 10 a.m. Eastern.

References:
[1] https://www.tradingview.com/news/tradingview:23db78011c966:0-powell-industries-executive-sells-shares/
[2] https://www.yahoo.com/news/feds-powell-heads-senate-panel-122752819.html
[3] https://www.morningstar.com/news/marketwatch/2025062453/powell-is-mum-on-future-rate-cuts-trump-calls-on-republicans-in-congress-to-work-him-over