Federal Reserve Chair Jerome Powell signaled Friday that the central bank could lower interest rates in the coming months, though he gave no timeline and stressed that any move would be
cautious as policymakers weigh the effects of tariffs and other economic pressures.
In a closely watched speech at the Fed’s annual Jackson Hole symposium, Powell acknowledged rising risks on both sides of the economy: unemployment could climb further as hiring slows, while inflation remains stubbornly above target.
“The shifting balance of risks may warrant adjusting our policy stance,” Powell said, pointing more directly than before to the possibility of a rate cut.
Still, he emphasized that the Fed would base decisions on how inflation and the labor market evolve. With three meetings left this year — September, late October, and December — it’s unclear when or how often the Fed might cut.
Wall Street welcomed the remarks, with the S\&P 500 jumping 1.5% in midday trading. Goldman Sachs economists said Powell’s comments support expectations of a quarter-point cut at the Sept. 16–17 meeting. The Fed’s benchmark rate is currently 4.3%.
Political Pressure Intensifies
Powell’s comments come as the Fed faces heavy scrutiny from the White House. President Donald Trump has repeatedly attacked Powell, demanding rate cuts to reduce government borrowing costs on the nation’s $37 trillion debt and to revive the sluggish housing market.
While Powell spoke in Wyoming, Trump escalated his criticism in Washington, threatening to fire Fed Governor Lisa Cook over unproven allegations of mortgage fraud — a move that could allow him to install a loyalist on the Fed’s board. Traditionally, the Fed is independent from politics, and presidents can only remove governors “for cause.” Cook, attending the conference, declined comment.
Powell received a standing ovation before his address, underscoring the support he holds among global economists and central bankers in attendance.
Inflation Pressures from Tariffs
Powell highlighted tariffs as a key driver of price increases. Consumer prices rose 2.7% in July compared with a year earlier, above the Fed’s 2% goal. Excluding food and energy, core inflation was 3.1%.
He noted that tariffs are lifting costs for imported goods such as furniture, toys, and shoes. However, he suggested the effect may be a one-time price adjustment rather than a long-lasting inflation surge.
“Come what may, we will not allow a one-time increase in the price level to become an ongoing inflation problem,” Powell said, signaling that deep cuts — as Trump has demanded — are unlikely.
Jobs Outlook and Immigration
Although hiring has slowed sharply this year, unemployment remains low. Powell observed that reduced immigration has eased labor supply, meaning fewer new jobs are needed to keep joblessness steady. Even so, he warned the risk of layoffs and a weakening job market is risin
Framework Update
The second half of Powell’s speech focused on changes to the Fed’s policy framework, first adopted in 2020. That framework — which allowed inflation to run above 2% temporarily — has been blamed for delaying the Fed’s response to the post-pandemic inflation surge.
After review, Powell said the framework has been updated to better suit today’s economy, which has shifted dramatically since 2020.
“A key objective has been to make sure that our framework is suitable across a broad range of economic conditions,” he said. Photo by Federalreserve, Wikimedia commons.
