Fed Chair hints at September rate cut amid mounting job market concerns

Powell Signals Possible September Rate Cut, Balances Job Risks and Inflation Concerns.

Federal Reserve Chair Jerome Powell on Friday signaled that the US central bank could cut interest rates at its September 16–17 meeting, while stopping short of a firm commitment. Speaking at the Fed’s annual Jackson Hole conference, Powell acknowledged rising risks to the labour market but cautioned that inflation pressures remain a concern.

“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. This unusual situation suggests that downside risks to employment are rising. And if those risks materialise, they can do so quickly,” Powell said. At the same time, he warned that tariffs could create “a more lasting inflation dynamic.”

Powell emphasised that with policy “in restrictive territory,” the Fed could adjust its stance depending on incoming data, particularly jobs and inflation reports due ahead of the September meeting. The central bank has kept its benchmark rate steady at 4.25%–4.50% since December.

The remarks leave the door open for a rate cut, but also highlight the Fed’s cautious approach as it weighs competing risks. The address marked Powell’s final Jackson Hole speech as Fed chair, with his term expiring in May. The Trump administration is seeking a replacement and has stepped up pressure on Powell and other governors to resign, while also urging faster rate cuts.

Despite political pressure, Powell has maintained that he intends to serve out his second term, having been first appointed chair by Trump and later reappointed by President Biden.

The Fed will release updated economic projections at its September meeting. As of June, policymakers anticipated two quarter-point cuts this year. The outcome may hinge on the August employment report, due just before the meeting.