Powell Hints at September Rate Cut, Warns on Jobs and Inflation Risks.
Federal Reserve Chair Jerome Powell on Friday left the door open to a possible interest rate cut at the central bank’s September 16–17 meeting, while stressing that the decision will hinge on upcoming jobs and inflation data.
Speaking at the Fed’s annual Jackson Hole conference, Powell said the labour market, though “in balance,” is showing signs of weakening as both supply and demand for workers slow. “This unusual situation suggests that downside risks to employment are rising,” he said, warning those risks could “materialise quickly.”
At the same time, Powell flagged that tariffs could generate a “more lasting inflation dynamic,” though he noted the baseline forecast is for the impact to fade. “With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he said.
The Fed has kept its benchmark rate steady at 4.25%–4.50% since December. Markets expect policymakers to deliver at least one cut this year, though Powell gave no guidance on the pace of any easing cycle.
The Jackson Hole address was Powell’s final as Fed chair, with his term expiring in May. President Donald Trump has increased pressure on Powell and other governors to resign in order to appoint new leadership, while continuing to demand faster rate cuts. Powell, reappointed to a second term by President Biden, has said he intends to serve it out.
Fed officials will publish updated economic projections at the September meeting. As of June, policymakers anticipated two quarter-point cuts this year, with the August jobs report likely to heavily influence their next move.
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