Federal Reserve Chairman Jerome Powell says that current market and economic conditions could allow for an interest rate cut soon. In his speech at the Fed’s annual conclave in Jackson Hole, Wyoming, the Fed Chair cited “sweeping 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 stable prices. Thus, future cuts are possible.
Powell noted that compared to the state of the economy during his speech last year, unemployment is lower and the labor market is in better condition. He went on to indicate that these conditions allow “us to proceed carefully as we consider changes to our policy stance.” “Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he added.
Fed Chairman Jerome Powell and the US Central Bank have received persistent calls to lower interest rates by those who say the US economy is performing well. The Trump administration has made several threats to the Fed, calling for rate cuts, including for Powell and his Fed Governor Lisa Cook to be fired. The Fed has been in hot water since the start of the year because of the lack of rate cuts, something Trump said he would make happen in his first year during his presidential campaign. Powell’s speech gave other Government officials the first real shot of endorsing an interest rate cut in almost a year.
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Furthermore, Powell went on to seemingly address the shots thrown at the Fed by Republicans for not cutting interest rates. “FOMC members will make these decisions based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach,” he said. The central bank has carefully considered the future of inflation and how U.S. tariffs on other countries could affect it, something the Trump Administration says won’t happen.
Powell’s remarks also sent a ripple effect through the stock market, sending the top indexes higher. The Dow Jones Industrial Average rose more than 600 points following the public release of Powell’s speech, while the policy-sensitive 2-year Treasury note saw a 0.08 percentage point fall to around 3.71%.
The Fed has held interest rates in a range between 4.25%-4.5% since December 2024. The Central Bank will deliberate on potential interest rate cuts and other affairs at the Federal Open Market Committee meetings on September 16-17.
