The Federal Reserve Chair opened the door to rate cuts even as he cautioned about inflation in his closely watched Jackson Hole speech.
Federal Reserve Chair Jerome Powell hinted at upcoming interest rate cuts as risks to the central bank’s dual mandate—maximum employment and price stability—increase.
In his final keynote address at the Jackson Hole Economic Symposium on Aug. 22, Powell indicated that current economic conditions may warrant a reduction to the benchmark federal funds rate.
“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said.
The U.S. labor market remains in a solid position, the central bank chief stated, despite the July employment report. Various job indicators, such as layoffs, nominal wage growth, and quits, have been little changed, while the unemployment “stands at a historically low level of 4.2 percent and has been broadly stable over the past year,” he said.
As for inflation, tariffs are creating upside risks, he stated, and levies are beginning to “push up prices in some categories of goods.”
According to Powell, the likely scenario is that tariffs will result in a one-time price shift.
“Of course, ‘one-time’ does not mean ‘all at once.’ It will continue to take time for tariff increases to work their way through supply chains and distribution networks. Moreover, tariff rates continue to evolve, potentially prolonging the adjustment process,” he said.
“Come what may, we will not allow a one-time increase in the price level to become an ongoing inflation problem.”
On the broader economy, Powell said that gross domestic product has slowed at a considerable pace in the first half of 2025, driven by a slowdown in consumer spending.
“As with the labor market, some of the slowing in GDP likely reflects slower growth of supply or potential output,” he stated.
Speaking to reporters during Powell’s speech, President Donald Trump confirmed that he will fire Fed Gov. Lisa Cook if she does not resign.
In an Aug. 20 Truth Social post, Trump called for Cook’s resignation following mortgage fraud allegations by Bill Pulte, chairman of the Federal Housing Finance Agency (FHFA).
In a statement to The Epoch Times, Cook said she does not have any “intention of being bullied to step down” from her position.
“I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts,” Cook said.
By Andrew Moran
