Is the Federal Reserve About to Slash Rates? Jerome Powell Drops a Major Hint

Federal Reserve Chair Jerome Powell gave a small hint that interest rates could be cut in the near future, warning that the U.S. economy is facing new risks, partly because of tariffs, CNN reported. Powell made these remarks in his yearly speech at Jackson Hole, Wyoming.

According to CNBC, this was the closest Powell came in his speech to suggesting that rate cuts might be on the way. Many on Wall Street expect a clear decision when the Federal Open Market Committee (FOMC) meets on September 16-17.

Powell said that big changes in trade, tax, and immigration policies were creating uncertainty. He noted that “the balance of risks appear to be shifting” between the Fed’s two main goals, keeping prices stable and ensuring strong employment.

Jerome Powell Highlights ‘Resilience’ of Economy

He pointed out that the economy still shows “resilience,” especially with a strong labor market. But he also warned that dangers are increasing. One of the main concerns, Powell said, is that tariffs are pushing prices higher, creating risks of stagflation, a mix of high inflation and slow growth, which the Fed wants to avoid.

Since Powell’s speech last year, the Fed’s benchmark interest rate has already been cut by a full percentage point. While unemployment remains low, Powell explained that the current situation gives the Fed the space to “proceed carefully” when thinking about changing policy.

He added that with interest rates already in a restrictive zone, the Fed might need to adjust its policy if risks continue to rise.

Powell also stressed the independence of the Federal Reserve, saying that decisions will only be based on data and economic outlook. He underlined that the Fed will not give in to outside pressure. His comments came at a time when former President Donald Trump has been openly pushing the Fed to lower rates faster.

Strong Market Reactions After Powell’s Statement

Following Powell’s speech, markets reacted strongly. CNN reported that bonds rallied, and Treasury yields dropped sharply as traders bought bonds to lock in higher returns before any rate cut.

The yield on 2-year, 10-year, and 30-year bonds all fell. Stock markets also jumped on hopes of cheaper borrowing costs. The Dow Jones rose 1.5 percent, while the S&P 500 gained 1.3 percent and the Nasdaq Composite increased by 1.35 percent.

The possibility of a rate cut is being seen as a response to slower job growth. July’s jobs report showed hiring had cooled more than expected, even though the unemployment rate stayed low. Lower interest rates, if introduced, could make borrowing cheaper and give the economy a boost.

Also Read: Why Trump Is Targeting Federal Reserve Chair Jerome Powell Now More Than Ever