Fed chair Jerome Powell signals interest rate cut for September

Federal Reserve Chair Jerome Powell on Friday acknowledged the dual risks of a weakening job market and stubborn inflation, while suggesting the central bank may soon move toward lowering interest rates. His remarks came in a closely watched speech at the annual Jackson Hole, Wyoming economic symposium.

“Risks to inflation are tilted upward, while risks to employment are tilted downward — a difficult combination,” Powell said.

He noted the Fed will “proceed carefully,” but the evolving balance of risks “may warrant adjusting our policy stance.”

Economists interpreted the comments as a clear signal that a rate cut is likely at the Fed’s September 17 meeting, which would be the first reduction since December 2024. Markets rallied on the remarks, with the S&P 500 up 1.3% by late morning.

“This is about as direct as Powell can get that his stance has shifted since July and he’s leaning toward a September cut,” said Heather Long, chief economist at Navy Federal Credit Union. “He’s justifying the pivot by pointing to employment risks after the surprisingly weak July jobs report.”

Powell emphasized that while the labor market is losing steam, inflation pressures tied to President Trump’s tariffs remain a concern. Inflation continues to run above the Fed’s 2% target and has edged higher in recent months.

The Fed chair cautioned that tariffs are likely to cause a “one-time shift in the price level,” driving a temporary increase in inflation. “Of course, ‘one-time’ does not mean ‘all at once,’” he added. “It will take time for higher tariffs to ripple through supply chains and distribution networks. And since tariff rates are still changing, the adjustment process could be extended.”

His comments underscore the challenges facing the central bank as it tries to balance its dual mandate of maximum employment and stable prices. Powell has also been under political pressure, with President Trump repeatedly calling for his resignation.