Fed Chair Faces Lawmakers at a Critical Juncture

When Jerome H. Powell, chair of the Federal Reserve, last testified in front of Congress in July, he hailed the “considerable progress” the central bank had made in taming rapid inflation and set the stage for a pivot toward lower interest rates.

Mr. Powell confronts a far different economic and political landscape as he prepares to face lawmakers again on Tuesday and Wednesday. The Fed has paused its rate-cutting plans with inflation still above its target, and questions are swirling about how it will navigate the economic and institutional ramifications of tariffs and other policies that President Trump has put at the center of his presidency.

The semiannual hearings, which begin on Tuesday before the Senate Banking Committee, follow the Fed’s move into a new phase in its yearslong effort to tame price pressures. After lowering rates by a full percentage point last year, the Fed is in a holding pattern as it assesses how quickly to release its grip on the economy and ease borrowing costs.

Mr. Powell is likely to reiterate that a solid labor market has given the central bank latitude to be patient about its next steps, especially since progress toward its 2 percent inflation goal has recently been bumpy.

The incoming data have been slightly more reassuring, with price gains finally moderating in key sectors like housing. But sweeping proposals put forward by Mr. Trump that would affect immigration, tariffs and taxes have made the Fed’s job much more difficult.

The Fed, during Mr. Trump’s first trade war, did not respond to what it generally perceived as a one-off jump in prices stemming from tariffs. Instead, central bankers focused on souring business sentiment and a pullback in global demand, prompting it to lower rates in 2019 to shore up the economy.