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Jerome Powell in Jackson Hole: Conditions 'May Call for' Interest Rate Cut
Federal Reserve Chairman Jerome Powell gave a preliminary indication on Friday, August 22, that interest rate cuts are likely in the future, noting that a high level of uncertainty is making monetary policymakers' job difficult and warning of the risks of rising inflation and a declining labor market.
In his highly anticipated speech at the Fed's annual meeting in Jackson Hole, Wyoming, the central bank chief, in prepared remarks, referred to "fundamental changes" in tax, trade, and immigration policies. The result is that "the balance of risks appears to be shifting" between the Fed's twin goals of full employment and price stability.
While he noted that the labor market remains healthy and the economy has shown "resilience," he said that downside risks are rising. At the same time, he said that tariffs pose risks of renewed inflation—a stagflation scenario the Fed must avoid.
Cautious Changes
With the Fed's benchmark interest rate a full percentage point lower than when Powell delivered his keynote speech a year ago, and unemployment continuing to decline, Powell said conditions allow for "proceeding cautiously as we consider changes to our policy."
He added, "However, as policy moves into constriction, the underlying outlook and the shifting balance of risks may require us to adjust our policy stance."
It was the closest he came during the speech to endorsing the rate cut that Wall Street widely believes is coming when the Federal Open Market Committee meets on September 16 and 17.
