Jerome Powell, Chair of the United States Federal Reserve, has indicated the possibility of a rate cut during the upcoming meeting on September 16-17.
However, he has refrained from making a firm commitment, opting instead to emphasize the delicate balance of risks facing the economy, particularly in relation to the job market and inflation.
At the Fed’s annual conference in Jackson Hole, Wyoming, Powell described the current labor market as balanced in a ‘curious’ way, resulting from significant slowdowns in both the supply and demand for workers.
This situation has led to rising risks for employment, which Powell warned could materialize abruptly.
In his remarks, Powell expressed that while the labor market appears stable, there are notable downside risks that could impact job security, necessitating vigilance in policy decisions.
Furthermore, he noted concerns regarding inflation, specifically the potential for tariffs to create a persistent upward pressure on prices, suggesting that these dynamics need careful assessment and management.
As the Fed navigates this uncertain terrain, Powell remarked, “The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance.”
Despite maintaining a restrictive policy environment, he acknowledged that the shifted balance of risks could warrant an adjustment in their approach.
The comments have sparked optimism among traders, who now assign a nearly 90 percent probability to a quarter-point interest-rate cut next month, up from approximately 75 percent prior to Powell’s address.
In addition to hinting at potential cuts, Powell’s statements underscore the importance of employment and inflation reports scheduled before the Fed’s meeting, with the next jobs report set to release on September 5 and data on consumer and producer prices following shortly after.
The response to Powell’s address was positive, with attendees giving him a standing ovation, a notable moment in the context of a tenure marked by President Donald Trump’s unwavering criticism.
Trump, who initially appointed Powell, has frequently voiced discontent with the Fed’s interest rate decisions, advocating for immediate cuts and even suggesting that Powell should resign.
Trump’s administration is reportedly seeking a replacement for Powell while simultaneously exerting pressure on the Fed Governor Lisa Cook to step down as well.
Despite this, Powell has expressed his intention to complete his term, which extends until May.
The Fed has held its policy rate steady at the current 4.25 percent to 4.5 percent range since December, as officials adapt to the economic implications of the new administration’s policies.
Current inflation remains above the Fed’s 2 percent target, with projections indicating a potential increase as new import tariffs begin influencing consumer prices.
Some policymakers, including Christopher Waller, who is also listed among possible replacements for Powell, have argued that any inflation resulting from tariffs will be modest and temporary.
They suggest that rate cuts may be necessary to protect a weakening job market.
The economic data released since the last Fed meeting has prompted a spectrum of opinions among officials, with the upcoming August employment report likely to be critical in shaping the Fed’s forthcoming decisions.
These developments will inform the September meeting, during which policymakers will provide new quarterly economic projections, with prior assessments indicating that two quarter-point rate cuts may be needed later this year.
image source from：aljazeera
