US Fed May Cut Rates Soon Even As Inflation Risks Remain? Jerome Powell Provides Big Hint

Federal Reserve Chair Jerome Powell hinted at the possibility of future interest rate cuts as he warned of growing risks to the US economy. Speaking at the annual Jackson Hole conference, Powell said that shifting trade, tax, and immigration policies are creating new challenges for growth.

According to CNBC, this was the clearest sign yet that the Fed may cut rates when the Federal Open Market Committee meets on September 16-17. Powell said the economy is still “resilient,” with a strong labor market, but rising tariffs are increasing inflation risks.

Compared to last year, the Fed’s benchmark interest rate is already one percentage point lower.

Powell stressed that policymakers will move carefully, but noted that “the shifting balance of risks may warrant adjusting our policy stance.” He also underlined the importance of Fed independence, saying that decisions will be based only on economic data. 

Markets reacted strongly to Powell’s remarks. According to reports, US bonds rallied on Friday, with yields on 2-year, 10-year, and 30-year Treasuries falling as investors rushed to secure higher returns before a possible rate cut. Stocks also gained, with the Dow Jones Industrial 

The prospect of lower borrowing costs cheered investors even as the latest jobs report showed slower employment growth in July. Despite weaker job gains, the unemployment rate stayed low, giving the Fed some room to maneuver.

While Powell stopped short of confirming a September cut, his words suggest that lower rates could be coming soon.

ALSO READ: U.S. President Donald Trump Threatens Federal Reserve Governor With Termination: What Led to Fallout Between Two