Jerome Powell, chair of the U.S. Federal Reserve, subtly signaled that a September rate cut may be on the horizon during his address today (Aug. 22) at the Jackson Hole Economic Symposium in Wyoming. His remarks come as he faces the challenge of managing persistent inflation, cooling labor and mounting political pressure.
Traditionally, rising inflation would prompt rate hikes. But Powell suggested the labor market now poses the greater risk. While stopping short of explicitly endorsing a cut at next month’s Fed meeting, he hinted that a shift is likely. “The shifting balance of risks may warrant adjusting our policy stance,” he told the audience of economists.
The speech marked Powell’s final appearance at the high-profile symposium, where he has delivered the opening address for the past eight years. His term as Fed chair is set to end next May.
Powell’s comments landed at a sensitive moment for the U.S. economy. Inflation has stayed above the Fed’s 2 percent target for four years, ticking higher in recent months. July’s inflation read came in at 2.7 percent, while the core consumer price index (CPI), which excludes volatile food and energy costs, rose to 3.1 percent.
The Trump administration’s unpredictable tariff policy has exacerbated consumer price increases. “We expect those effects to accumulate over coming months,” said Powell, who noted that while levies will likely cause a “one-time” shift in price levels, the impact will filter through supply chains gradually rather than “all at once.”
Powell also highlighted weakness in the job market. July data from the Bureau of Labor Statistics revised employment figures for May and June down by a combined 258,000 jobs, while July itself added only 73,000. Powell described the labor market as being in a “curious kind of balance,” with slowdowns in both supply and demand for workers. He pointed to tighter immigration policies under President Donald Trump as a factor contributing to the slowdown.
Markets rallied on Powell’s signals that the Fed may cut rates soon. The Dow shot up 2 percent today, while the S&5 500 climbed nearly 1.6 percent. Bond yields fell, with the 10-year Treasuries declining by 7 basis points to 4.26 percent while the 2-year dropping 10 basis points to 3.69 percent, reflecting market anticipation of lower interest rates in the near future.
Powell underscores the Fed’s independence
Powell’s challenges aren’t only economic. He has faced repeated demands from Trump for rate cuts, sharp personal criticism, and even calls for his removal. This week, Trump extended his attacks to Fed governor Lisa Cook, urging her resignation on social media after she was accused of mortgage fraud by Federal Housing Finance Agency director Bill Pulte. Trump said today he would fire Cook if she does not step down.
Ousting Cook would further Trump’s push to reshape the Fed with allies who share his policy views. Last month, two Trump appointees, Christopher Wallen and Michelle Bowman, dissented from the Fed’s decision to hold interest rates steady, voting instead for a cut.
Though Powell avoided a direct defense of the Fed’s independence, he carefully underscored it. Monetary policy decisions, he said, will be made “based solely on their assessment of the data and its implications for the economic outlook and the balance of risks,” said Powell. “We will never deviate from that approach.”
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