Federal Reserve Chair Jerome Powell delivered his most dovish speech since 2022 at the Jackson Hole Economic Policy Symposium, strongly signaling the central bank will cut interest rates at its September meeting. Powell cited a challenging economic landscape where "risks to inflation are tilted to the upside and risks to employment to the downside."
The Fed chair highlighted slower economic growth, reduced consumer spending and emerging slack in the jobs market as key factors supporting a more accommodative monetary policy stance. According to the Daily Mail, July's jobs report showed only 73,000 new positions created against expectations of 100,000, with unemployment rising to 4.2 per cent.
Powell warned that Donald Trump's tariffs are beginning "to push up prices in some categories" of goods, creating upward pressure on inflation even as the labour market softens. "When our goals to inflation are in tension like this, our framework calls for us to balance both sides of our dual mandate," he told delegates.
Stock markets surged immediately following Powell's remarks, with the S&P 500 jumping 1.5 per cent and the tech-heavy Nasdaq climbing 1.9 per cent. The dramatic market response reflected investor relief over the prospect of lower borrowing costs ahead.
Fed independence under pressure
Powell used his high-profile address to reaffirm the Federal Reserve's independence amid escalating pressure from the Trump administration for faster rate cuts. The US President has repeatedly criticised Powell, giving him the nickname "Too Late" for not reducing borrowing costs sooner.
Trump has threatened to remove Powell before his term expires next year, despite constitutional protections for Fed independence. "Monetary policy is not on a preset course," Powell responded. "FOMC will make these decisions solely on their assessment of the data and its implications for the economic outlook."
September decision looms
The Independent reports the Fed's next policy meeting is scheduled for September 16-17, when the central bank is widely expected to deliver its first rate cut since the pandemic. Current rates sit at 4.25-4.5 per cent, according to the Daily Mail, directly influencing mortgage costs and investment flows.
Powell concluded his Jackson Hole speech by emphasising that Fed officials "will never deviate" from their data-driven approach to monetary policy, regardless of political pressure from the White House.
Sources used: "City A.M", "Independent", "Daily Mail" Note: This article has been edited with the help of Artificial Intelligence.
