Federal Reserve Chair Jerome Powell opened the door to a rate cut at the Fed’s September meeting, referencing softening labor conditions and revised employment data that revealed slower job growth than previously reported. Powell’s speech at Jackson Hole emphasized that although policy remains restrictive, downside risks to employment are rising and could materialize quickly as layoffs and rising unemployment. Markets responded immediately, with yields falling and expectations of a 25-basis-point cut in September gaining traction.
Powell also addressed the Fed’s updated monetary policy framework, clarifying that the 2020 shift away from preemptive hikes based on low unemployment was never intended to rule out tightening when necessary. The Fed removed language around tolerating above-target inflation, signaling a more balanced stance between price stability and full employment. While some policymakers remain cautious, recent weak labor data and political pressures—especially around tariffs—have complicated the rate path ahead.
“This unusual situation suggests that downside risks to employment are rising. If those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment” — Jerome Powell, Fed Chair
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Powell Opens Door to Interest Rate Cut, Citing Labor Markets
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Bloomberg, August 2025 - Powell Opens Door to Interest Rate Cut, Citing Labor Markets
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