Federal Reserve Chairman Jerome Powell signaled Friday that the central bank may consider cutting interest rates as soon as September, citing a “shifting balance of risks” in the U.S. economy.
Speaking at the Fed’s annual Jackson Hole symposium in Wyoming, Powell argued that the Fed’s restrictive policy stance has been appropriate to curb inflation but acknowledged that evolving economic pressures may warrant a shift.
“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said.
Tariffs and Immigration Policy Blamed for Headwinds
Powell attributed some of the recent economic challenges to higher tariffs and tighter immigration policy. He said tariffs have introduced “new challenges” to growth, while a slower inflow of workers has created an “abrupt slowdown in labor force growth.”
He also pointed to longer-term uncertainty surrounding tax, spending, and regulatory policies, all of which could shape U.S. growth and productivity.
Inflation Risks Up, Job Market Risks Down
Powell emphasized the Fed’s dual mandate — balancing stable prices with maximum employment. He said risks to inflation remain “tilted to the upside,” but risks to employment are now “tilted to the downside,” creating a difficult balancing act.
The Fed chair noted that the policy rate is already 100 basis points closer to neutral than a year ago, suggesting that there may now be room to ease conditions if the labor market continues to soften.
Trump Slams Powell as “Too Late”
President Donald Trump, who has repeatedly pressed Powell to lower rates, blasted the Fed chair for moving too slowly.
“He should have cut them a year ago. He’s too late,” Trump said Friday afternoon in response to Powell’s remarks.
Analysts Expect Symbolic Cut
Financial experts believe Powell’s speech leaned toward a September rate cut, though likely only a small one.
Blaze Media contributor Carol Roth told Blaze News the Fed appears more worried about the labor market than inflation at this stage, with stagflation risks in mind.
She said a 25-basis-point cut (0.25%) was the most likely outcome, calling it “more symbolic than impactful.”
“Powell is definitely late to a rate cut … I personally believe the Fed could cut a full percent and still not have policy unleash inflationary pressures, but I don’t foresee a cut that substantial in September,” Roth added.
What’s Next
Markets now anticipate at least a quarter-point cut at the Fed’s next policy meeting, though Powell stressed that the Fed will “proceed carefully” in adjusting its stance.
The decision in September will likely hinge on labor market reports and inflation data in the coming weeks.
