Federal Reserve Chair Jerome Powell boosted expectations of an interest rate cut this September, offering cautious reassurance to investors while addressing inflation risks tied to President Trump’s tariffs.
Speaking at the central bank’s annual symposium in Jackson Hole, Wyoming, Powell suggested borrowing costs may soon ease, a shift that sent U.S. equities sharply higher. The Fed’s benchmark rate currently stands between 4.25% and 4.5%.
“In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside—a challenging situation,” Powell said. He added that the inflationary impact of tariffs appears “clearly visible,” but he believes there is a “reasonable” case that price pressures will be “relatively short lived – a one-time shift in the price level.”
Powell avoided direct mention of political pressure from Trump, who has frequently demanded large rate cuts and hurled insults at the Fed chief, calling him a “numbskull” and a “stubborn moron.” The president has even floated removing Powell from his post, though legal authority for such a move remains unclear.
In his remarks, Powell stressed that monetary policy will depend solely on economic data. “Monetary policy is not on a preset course,” he said. “We will never deviate from that approach.”
Markets welcomed Powell’s comments. The S&P 500 jumped about 1.5% by the close of U.S. trading Friday. Analysts said the tone of the speech pointed toward a potential cut without fully committing.
“Chair Powell has shown he has an open mind to reading the data tea leaves,” said Brian Jacobsen, chief economist at Annex Wealth Management. Diane Swonk, chief economist at KPMG US, added, “Powell opened the door a little wider to a cut in rates in September,” though she warned that the Fed remains wary of persistent inflation.
Stephen Brown of Capital Economics said a September cut looks “almost nailed on” but noted that stronger job gains or troubling price data in August could cause a delay.
Powell’s appearance likely marks his final Jackson Hole address before his term ends in May 2026. He was appointed Fed chair by Trump in 2017. Since then, tensions between the two have escalated, with Trump recently calling for Fed Governor Lisa Cook’s resignation over alleged mortgage fraud. Cook has refused, saying she would not be “bullied” out of office.
Central banks typically cut rates to spur growth during periods of economic weakness, though they must balance that goal with keeping inflation under control. Powell reiterated that the Fed will continue weighing both risks carefully, emphasizing that decisions will rest on evidence rather than political demands.
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