The Federal Reserve is reportedly considering cutting interest rates, as indicated by its chair, Jerome Powell. He expressed concerns that President Donald Trump’s tariffs and immigration policies have created turbulence in the global economy and affected the U.S. job market.
Despite ongoing pressure from Trump to lower rates and calls for his resignation, Powell has maintained a cautious approach. He suggested during a recent speech at the Jackson Hole symposium that the current economic environment may necessitate a reevaluation of monetary policy. He noted the potential for tariffs to increase inflation while simultaneously hurting the labor market due to stricter immigration policies.
After Powell’s remarks, U.S. stock markets experienced a notable increase, with the S&P 500 rising by 1.5% and the Dow Jones Industrial Average climbing to a record high. The Nasdaq Composite also saw gains, rebounding from previous declines.
Trump has actively challenged the independence of the Fed. He called for the resignation of Fed governor Lisa Cook following allegations of misconduct against her, asserting that he would take action if she did not resign. Powell has been more vocal regarding the impact of tariffs under Trump’s administration and highlighted the changing dynamics in the labor force due to these policies.
Powell also pointed out that while job growth has continued, recent data indicates a slowdown in labor market expansion. He described the current situation as unusual, with both the supply and demand for workers decreasing simultaneously. This trend raises concerns about potential job losses and rising unemployment.
The Fed has held interest rates steady in recent meetings, prioritizing clarity on the effects of governmental policies, including tariffs and deportations. In the last meeting, two governors dissented from the majority’s decision, a rarity in recent history. Upcoming discussions will include candidates to potentially succeed Powell, including individuals advocating for a more aggressive approach to rate cuts.
Source: https://www.theguardian.com/business/2025/aug/22/jerome-powell-speech-jackson-hole