Fed Chief Signals Openness To Interest Rate Cuts In Economic Outlook Speech

Federal Reserve Chair Jerome Powell on Friday gave a tepid indication of possible interest rate cuts ahead as he noted a high level of uncertainty that is making the job difficult for monetary policymakers.

In his much-anticipated speech at the Fed’s annual conclave in Jackson Hole, Wyoming, the central bank leader in prepared remarks cited “sweeping changes” in tax, trade and immigration policies. The result is that “the balance of risks appear to be shifting” between the Fed’s twin goals of full employment and stable prices.

While he noted that the labor market remains in good shape and the economy has shown “resilience,” he said downside dangers are rising. At the same time, he said tariffs are causing risks that inflation could rise again — a stagflation scenario that the Fed needs to avoid.

With the Fed’s benchmark interest rate a full percentage point below where it was when Powell delivered his keynote a year ago, and the unemployment rate still low, conditions allow “us to proceed carefully as we consider changes to our policy stance,” Powell said.

“Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he added.