Jerome Powell on Tuesday blamed Donald Trump for the Fed’s reluctance to cut rates in 2025.

That’s nothing new, but he was more direct about it than he was last week, during two days of testimony on Capitol Hill.

During his remarks to lawmakers in June, Powell said rates would be closer to neutral by now were it not for the upward bias on display in the median core PCE forecast from the Fed’s economic projections.

The figure above shows you the evolution of that core price growth forecast, along with the median GDP projection from the SEP.

This is pretty simple, really: The median Fed official believes steep tariffs will likely lead to higher inflation and lower growth.

Whether that’s accurate or not is the key macroeconomic question for Fed officials. Powell’s contention is that with the economy still performing reasonably well (remember: Q1’s contraction was attributable to trade distortions, although we now know consumption was much weaker than initially thought) and the labor market likewise holding up, there’s no reason to rush into more cuts when the Committee’s marking their inflation projections higher.

Trump doesn’t agree, and as noted here on Monday, he’s probably right to suggest Powell’s clinging a little too tightly to the “wait-and-see messaging” at this juncture. My view — and I doubt I’m alone — is that Powell’s determination to defend the Fed’s independence in the face of near daily harangues from the presidential TruthSocial feed, is beginning to interfere with his capacity to assess the situation by reference solely to risks around the dual mandate.

That’s not to say Powell’s “wrong,” per se. It’s just that whether he admits it or not, and regardless of how cordial Trump might be over lunch at The White House, the two men are at loggerheads. There’s no dancing around that anymore. Trump doesn’t like Powell and I can assure you the feeling’s mutual.

Tension between the two’s likely to escalate further when Trump announces his pick to replace Powell. That announcement’s expected over the next several months, and I think it’s fair to suggest Trump’s going to institute some version of Scott Bessent’s “shadow Fed Chair” idea, where that means Trump’s nominee will be on television and in the media deriding Powell alongside Trump.

That’s the backdrop for Powell’s Tuesday remarks at the ECB’s annual central banker festival in Sintra. “We went on hold when we saw the size of the tariffs,” he said. In case that wasn’t clear enough, he said it again: “Inflation forecasts for the US went up materially as a consequence of the tariffs.” (Soooo… you’re saying it’s the tariffs?)

That’s not what “Tariff Man” wants to hear, nor will he be amused with Powell’s assessment about the likely trajectory of inflation going forward.

“We expect to see over the summer some higher readings,” Powell mused, during the same panel discussion, before insisting, to loud applause from the audience, that the only things which matter to the Fed are “the goals that Congress has given us.” That, not any political agenda, is what the FOMC focuses on “100%,” he insisted.

Christine Lagarde offered an ingratiating show of rhetorical support. “I think we would do exactly the same thing as our colleague, Jay,” she gushed. The ECB has, of course, cut rates four times in 2025 and eight times (or 10 times, on Trump’s math) this cycle.