United States Federal Reserve Chair Jerome Powell has pointed to a possible rate cut at the central bank’s September meeting but has stopped short of committing to cutting interest rates.
Powell’s remarks walked a narrow line, acknowledging growing risks to the job market while also saying risks of higher inflation remain.
“While the labour market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers,” Powell told an audience of international economists and policymakers at the Fed’s annual conference in Jackson Hole, Wyoming, on Friday.
Powell emphasized that the stability of the unemployment rate and other labour market measures allows the Fed to proceed carefully as they consider changes to their policy stance.
“Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,”
Powell said. The Fed chair’s comments open the door to a rate cut at the Fed’s September 16-17 meeting, but also put heavy weight on jobs and inflation reports that will be received before then.
US stocks rose after Powell’s remarks, and traders assigned a nearly 90 percent probability of a quarter-point interest-rate cut next month, up from about 75 percent earlier.
Powell received a standing ovation at the start of his remarks, a coda to eight years which began and ended with withering criticism from US President Donald Trump, who contends there is no risk of inflation and that the Fed should slash rates immediately.
Trump has been pressuring the Fed with calls for Powell to resign that broadened this week to calls for Fed Governor Lisa Cook to also leave office. Powell was reappointed to a second four-year stint by President Joe Biden.
The Trump administration is both searching for a replacement and pressuring Powell and other members of the Board of Governors to resign in hopes of appointing a majority of the seven-member body.
Alongside his update on the economy, Powell released a new Fed strategic framework that emphasized that its maximum employment mandate hinges on price stability.
The Fed has kept its policy rate of interest on hold at the current 4.25 percent to 4.5 percent range since December as officials began grappling with the likely impact the incoming administration’s policies might have on inflation, which remains above the central bank’s 2 percent target and is projected to rise as new import tariffs work their way into consumer prices.
Economic data since the Fed’s last meeting have pulled officials in both directions, with an upcoming employment report for the month of August now figuring heavily in what the Fed says and does at its September meeting.
The meeting will include new quarterly economic projections from policymakers who, as of June, anticipated the need for two quarter-point rate cuts this year.