Federal Reserve Chair Jerome Powell delivered a highly anticipated speech at the annual Jackson Hole Economic Symposium in Wyoming, hinting at a potential interest rate cut at the Fed’s September 16-17 meeting without making a firm commitment.
Addressing global economists and policymakers, Powell highlighted the delicate balance between a cooling labor market and persistent inflation pressures, particularly driven by tariffs.
His remarks come as the central bank faces internal divisions and external political pressure, shaping expectations for monetary policy adjustments.
U.S. stocks surged, with traders estimating a nearly 90% chance of a quarter-point rate cut next month.
Powell described the labor market as being in a “curious kind of balance,” marked by reduced hiring and a shrinking labor supply, partly due to demographic shifts and immigration policies.
He noted, “This unusual situation suggests that downside risks to employment are rising.”
If these risks materialize, layoffs could spike, prompting the Fed to consider lowering its benchmark interest rate to stimulate economic activity.
However, Powell cautioned that tariffs are already pushing prices higher, with “high uncertainty about timing and amounts,” raising concerns about sustained inflation.
The Fed’s upcoming jobs and inflation reports will heavily influence its next steps.
The speech unfolded amid unprecedented pressure from President Donald Trump, who has repeatedly called for Powell’s resignation and urged immediate rate cuts to boost the economy, particularly the housing market.
Trump’s criticisms extended to Fed Governor Lisa Cook, whom he accused of mortgage fraud based on unverified claims by Federal Housing Finance Agency head Bill Pulte.
Cook responded, stating she would take questions about her financial history “seriously as a member of the Federal Reserve” and is gathering facts to address the allegations.
Powell, whose term as chair ends in May 2026, emphasized the Fed’s independence, underscoring that its decisions remain data-driven despite external attacks.
Alongside his economic outlook, Powell introduced a new Fed policy framework prioritizing price stability as essential for maximum employment.
This shift aims to address inflation risks proactively, moving away from the 2020 framework some critics blamed for delaying rate hikes.
While Powell’s comments fueled market optimism, analysts noted the Fed’s cautious approach.
“Core inflation is still stubborn and the labor market, while showing some signs of cooling, isn’t screaming for emergency intervention,” wrote Kevin Ford of Convera.
With conflicting economic signals, Powell’s speech sets the stage for a pivotal September meeting, balancing job market concerns against inflationary pressures.