Fed chair suggests it may be time to lower rates
Federal Reserve chair Jerome Powell may be warming towards the idea of interest rate cuts, suggesting Friday that the central bank could be prepared to move rates lower soon.
In a much-anticipated address at the Fed’s annual conference in Jackson Hole, Wyoming, Powell indicated labor market concerns could strengthen the case for a cut, even despite continuing inflation risks.
“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.
Market expectations of a cut at the Fed’s next meeting – scheduled for September 17 – soared after Powell’s comments. CME’s FedWatch, a gauge of what analysts expect from upcoming central bank decisions, jumped to 91.5%v following the Fed chair’s remarks.
Powell’s speech marks the strongest sign yet that the Fed is considering its first cut of 2025, having maintained throughout the year that more time is needed to weigh the risks of the Trump administration’s trade war to the economy.
The central bank has kept cuts on ice in each of its decisions this year despite mounting pressure from the president and his allies to bring rates lower.
The Fed chair, whose term is set to end in May next year, described a “curious kind of balance” at play in the labor market, but highlighted strengthening downside risks to employment. “If those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment,” he said.
Wall Street rallied in the wake of Powell’s comments, with the S&P500 rising 1.3% and the Dow Jones and Nasdaq composite also jumping.
Two Fed decisionmakers voted against holding rates steady in its July meeting, a highly unusual decision that saw governors Christopher Waller and Michelle Bowman press for a 25-basis-point cut to boost the economy.
Powell’s Friday speech arrived amid a continuing firestorm at the Fed, with President Trump and Federal Housing Finance Agency (FHFA) director Bill Pulte both calling for governor Lisa Cook to resign over allegations – as yet unproven – that she committed mortgage fraud.
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