The Federal Reserve is focusing on the possible economic effects of tariffs, as officials say the lingering uncertainty has kept the central bank from cutting its interest rates.

Federal Reserve Chair Jerome Powell said during a European Central Bank conference on Tuesday that the Fed may have already proceeded with interest rate cuts if not for President Donald Trump's tariffs.

“In effect, we went on hold when we saw the size of the tariffs and where essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs,” Powell said. “We're simply taking some time. As long as the U.S. economy is in solid shape, we think the prudent thing to do is to wait and learn more and see what those effects might be.”

Economists expect inflation to reignite this summer as the current tariffs work their way through the economy. Retailers have reported passing on the additional import tax costs to consumers, and economists suspect this will raise the prices of many goods in the coming months.

Powell said the tariffs haven’t yet driven inflation data significantly higher, but that could still be coming.

After reducing interest rates in late 2024, the Fed has kept rates at their current levels of 4.25% to 4.5% so far in 2025. The hold has been much to the angst of Trump, who has repeatedly criticized Powell for not cutting interest rates.

Some members of the Federal Open Market Committee have said they would consider cutting interest rates as early as the July 30 meeting. While Powell didn’t commit to a specific timeline on interest rate cuts, he said Fed officials would closely watch data to decide “meeting by meeting” when to begin interest rate reductions. 

“I wouldn't take any meeting off the table or put it directly on the table. It's going to depend on how the data evolves,” Powell said.