Jerome Powell, the chair of the US Federal Reserve, has increased expectations for an interest rate cut in September, a move that President Trump has been advocating for months. At a conference in Jackson Hole, Wyoming, Powell discussed the potential temporary effects of Trump’s tariffs on inflation.
Despite some anticipation, Powell did not directly address the political pressures he has experienced from the Trump administration, including criticism and calls for his removal from office. His shift to a more accommodating monetary stance contributed to a rise in share prices. Economists and investors have long anticipated a reduction in borrowing rates from the current range of 4.25% to 4.5%, especially following weaker data from the US jobs market. However, concerns about the impact of tariffs have led to mixed expectations regarding inflation.
Powell acknowledged the complexity of the current economic situation, stating that “risks to inflation are tilted to the upside, and risks to employment to the downside.” Central banks often lower rates to stimulate growth when economic slowdowns are evident. However, the necessity to control inflation complicates these decisions, as high rates typically help manage rising prices.
The chair noted that the effects of tariffs on consumer prices are now apparent but suggested that the inflationary impact could be a one-time adjustment. He downplayed the likelihood of inflation becoming persistent due to rising wage demands. Additionally, Powell indicated that current interest rates are constraining economic activity, and he suggested that a shift in policy could be warranted.
Powell cautioned against assuming a rate cut is guaranteed in September, emphasizing that monetary policy is not predetermined and would be guided by data assessments. He mentioned the importance of maintaining this approach, regardless of external pressures.
This address was likely Powell’s last at the Jackson Hole gathering before his term concludes in May 2026. Appointed by Trump in 2017, Powell has faced increasing hostility from the president, who has criticized him for not supporting deeper rate cuts. Recently, Trump called for the resignation of another Fed official, although that official resisted these demands. Following Powell’s speech, US stock indexes climbed significantly, indicating a positive market response, though some analysts cautioned about ongoing inflation risks that could influence future decisions.
Source: https://www.bbc.com/news/articles/c5ylwyx43x4o?at_medium=RSS&at_campaign=rss