JACKSON HOLE, Wyo. (AP) — Federal Reserve Chair Jerome Powell signaled a potential interest rate cut at the Fed’s September meeting during his highly anticipated speech at the annual Jackson Hole economic symposium on Friday, August 22, 2025. While he stopped short of making a firm commitment, Powell noted that the “shifting balance of risks” in the U.S. economy “may warrant adjusting our policy stance,” according to The Economic Times.
Powell’s remarks highlighted the central bank’s ongoing dilemma. On one hand, he pointed to a weakening labor market, citing “unusual” behavior and a significant slowdown in job creation, with downside risks to employment “rising.” This concern is a core component of the Fed’s dual mandate to achieve both maximum employment and stable prices. The Fed has held interest rates steady this year, but a continued cooling in the job market could necessitate a rate cut to stimulate economic growth, as reported by The Economic Times.
“Risks to inflation are tilted to the upside and risks to employment to the downside, a challenging situation when our goals, our intention like this, our framework calls for us to balance both sides of our dual mandate,” Jerome Powell
On the other hand, Powell acknowledged a new inflationary risk stemming from the Trump administration’s trade policies. “The effects of tariffs on consumer prices are now clearly visible,” he said, warning that these effects are likely to “accumulate over coming months.” However, Powell also expressed the view that the impact of tariffs on inflation will likely be a “one-time shift in the price level” rather than a persistent problem, as long as the Fed manages the situation. “Come what may, we will not allow a one-time increase in the price level to become an ongoing inflation problem,” he asserted, as reported by Newsweek.
Powell’s speech comes amid repeated public pressure from President Donald Trump to cut interest rates. The president has argued that high rates are harming the economy and the housing market. While Powell’s remarks are seen as a move toward the rate cuts the administration has demanded, the Fed chair reaffirmed the central bank’s independence from political pressure, stating that monetary policy decisions are made “based solely on their assessment of the data.”
The financial markets reacted positively to Powell’s speech. U.S. bonds rallied and the S&P 500 gained 1.2 percent on the day, with analysts interpreting his comments as a strong signal that a rate cut is now more likely than previously thought. The Fed’s next policy meeting is scheduled for September 16-17.
