Federal Reserve Chair Jerome Powell faced some heat from both sides of the political aisle regarding the committee’s decision against lowering interest rates. During the first of two days of congressional testimony, the chair said the current data supports rate cuts, but inflation forecasts give him pause.
President Donald Trump said he hoped Congress would work over “Too Late” Powell ahead of Powell’s testimony in front of the House Financial Services Committee on Tuesday, June 24. In a Truth Social post, he claimed cutting interest rates by several percentage points could save the U.S. $800 billion per year, presumably in interest payments related to the country’s climbing debt.
So far in fiscal year 2025, the U.S. has spent $776 billion in interest expense on the country’s $36 trillion in debt. In fiscal year 2024, the average interest rate paid was slightly higher than it is now, and the U.S. paid $1.13 trillion. Since 2010, the lowest interest expense paid by the U.S. was in 2012 at $360 billion, when the national debt was less than half what it is today.
Asked whether the “name-calling” impacted Powell, the chair answered, “You want to just stay focused on that task as long as you’re sitting in these chairs that we occupy – focus on that task. Do what you think is the right thing and take the consequences.”
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The U.S. has spent $776 billion in interest expense on the country’s $36 trillion in debt so far in fiscal year 2025.
Two Fed board members split with Powell
Turning up the heat on Powell were comments by two Federal Reserve Board members, Christopher Waller and Michelle Bowman. Both indicated during the week of June 15 that they could support a rate cut during the July meeting over concerns of the labor market weakening. In his testimony, Powell stayed noncommittal.
“If you just look in the rearview mirror and look at the existing data that we’ve seen, you can make a good argument” for multiple cuts, Powell said. The reason they haven’t yet cut is because forecasters “expect a meaningful increase in inflation over the course of this year.”
He later clarified the increase in those forecasts is due to tariffs. However, current data shows no impact of Trump’s tariff policy yet. Inflation has fallen slightly since the start of the year, while the federal unemployment rate has remained relatively unchanged over the past year.
The Fed’s preferred inflation measure, the core personal consumption expenditures price index, showed prices rose 2.5% on the year in April, slightly above the Fed’s 2% target. In May, the unemployment rate held steady at 4.2%.
“I would say this: I think if it turns out that inflation pressures do remain contained, then we will get to a place where we cut rates sooner rather than later,” Powell said. “I wouldn’t want to point to a particular meeting. I don’t think we need to be in any rush because the economy is still strong.”
The human impact of high interest rates
Lawmakers on both sides of the aisle brought up the personal price paid by Americans with higher interest rates, and especially its impact on housing and housing availability.
Rep. Rashida Tlaib, D-Mich., was one of the more forceful on the issue.
“We’re talking about a housing crisis that is getting worse right now because we’re not paying attention to future instability” caused by current rates, Tlaib told Powell. “I come from a community right now that I believe right now is being impacted by the current framework that you’re putting together, that I do feel like it’s going to [have] long-term effects on the housing crisis, and you’re ignoring it.”
Powell said the best thing for homeowners and everyone else is to fully restore price stability. As of June 18, the average 30-year fixed mortgage rate is 6.81%, up from 6.08% in September 2024 when the Fed made its first interest rate cut since 2020.
