Jerome Powell says long-awaited rate cuts could be coming soon as Trump admin ramps up pressure

Federal Reserve Chair Jerome Powell on Friday in a high-profile speech said that the job market is on such shaky ground that the Federal Reserve may soon need to cut interest rates to support the economy. Powell suggested the labor market could benefit from lower rates, which the Fed has kept unchanged for eight straight months.

In his speech, he suggested that the Fed may need to cut rates at its next meeting, in September. He cited growing risks to the economy, including some “unusual” behavior in the job market that could become a cause for concern. His remarks come at a time when the Trump administration is ramping up the pressure for rate cuts. Trump has repeatedly called for rate cuts, arguing there is “no inflation” and saying that a cut would lower the government’s interest payments on its $37 trillion in debt.

He was speaking at the Fed’s annual economic symposium in Jackson Hole, Wyoming, a conference with about 100 academics, economists, and central bank officials from around the world.


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In his key remarks for his keynote speech at the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole, Powell said, "Downside risks to employment are rising."

He said the possibility of Trump’s tariffs having only a short-lived effect on inflation is “reasonable.”

“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he added.

Stocks surged on Friday morning after Powell hinted that an interest rate cut could come as soon as September. The Dow jumped 680 points (1.5%), while the S&P 500 climbed 1.3% and the tech-focused Nasdaq Composite advanced 1.35%.

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“The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance,” Powell said in prepared remarks. That suggests the Fed will continue to evaluate jobs and inflation data as it decides whether to cut rates, including at its next meeting Sept. 16-17.

“Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he added.

Tariffs lifting inflation, says Powell

In his remarks, the Fed chair underscored that tariffs are lifting inflation and could push it higher in the coming months. He also suggested that the job market isn’t clearly weakening in a way that would push the Fed to reduce borrowing costs, which can boost growth and hiring.

“The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over coming months, with high uncertainty about timing and amounts,” Powell said.

He also warned of a global economic outlook because of the tariffs imposed by the President. Citing recent inflation data, Powell said, “Higher tariffs have begun to push up prices in some categories of goods.” And unlike recent months, he seemed more convinced than ever that the effects of tariffs are “clearly visible.”

“We expect those effects to accumulate over coming months, with high uncertainty about timing and amounts,” he added in his Jackson Hole address Friday.

But it remains to be seen whether prices will move higher and more or less stay there, or lead to more persistent recurring price increases, he said.

Inflation has crept higher in recent months though it is down from a peak of 9.1% three years ago. Tariffs have not spurred inflation as much as some economists worried but are starting to lift the prices of heavily imported goods such as furniture, toys, and shoes.

Regarding the job market, Powell noted that even as hiring has slowed sharply this year, the unemployment rate remains low. He added that with immigration falling sharply, fewer jobs are needed to keep unemployment in check.

Yet with hiring sluggish, the risks of a sharper downturn, with rising layoffs, has risen, Powell said.

(With AP inputs)