Powell Signals September Rate Cut as Fed Weighs Tariffs and Jobs Data

by Emmitt Barry, with reporting from Washington D.C. Bureau Staff

JACKSON HOLE (Worthy News) – Federal Reserve Chairman Jerome Powell on Friday signaled that long-awaited interest rate cuts could be on the horizon, telling central bankers that current conditions “may warrant” an adjustment to the Fed’s restrictive policy stance.

“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said in his keynote remarks at the Fed’s annual Jackson Hole Economic Symposium, his final appearance at the gathering as chair.

Markets rallied sharply on Powell’s remarks. The Dow Jones Industrial Average surged more than 800 points, while the Nasdaq Composite and the S&P 500 each gained over 1 percent. Traders interpreted his words as a clear signal that a rate cut is likely in September, with CME FedWatch projecting a 91.3% chance of a quarter-point reduction.

Powell acknowledged the Fed faces a “challenging situation” balancing risks of tariff-driven inflation against slowing employment growth. U.S. employers added just 75,000 jobs in July, with earlier months revised downward by 258,000. He noted a sharp falloff in immigrant workers and a slight decline in labor force participation.

“The effects of tariffs on consumer prices are now clearly visible,” Powell said. “The question that matters for monetary policies is whether these price increases are likely to materially raise the risk of an ongoing inflation problem. A reasonable base case is that the effects will be relatively short-lived — a one-time shift in a price level.”

The White House has recently finalized sweeping tariff hikes, ranging from 15% to 41% on imports from 67 countries. President Trump has also imposed a 10% blanket tariff on all imports, calling the levies a tool to pressure trading partners and generate revenue for the Treasury. Business groups, including the National Retail Federation, have warned the tariffs will strain companies’ ability to absorb higher costs.

The Fed has so far held off on lowering rates this year despite projecting two cuts in 2025. Powell said policymakers will continue to “proceed carefully” but made clear that easing is under active consideration.

Heather Long, chief economist at Navy Federal Credit Union, described Powell’s comments as unusually direct. “His Jackson Hole speech is about as clear-cut as the Fed gets,” she wrote on X, while cautioning that the Fed is unlikely to pursue multiple cuts if tariffs keep inflation elevated.

Meanwhile, political pressure on the Fed continues to mount. President Trump, who has repeatedly pressed Powell for lower rates, is preparing for the end of Powell’s term in May. Treasury Secretary Scott Bessent confirmed he will begin interviewing potential successors around Labor Day, narrowing a list of 11 candidates compiled by the administration.

The president is also seeking the resignation of Fed Governor Lisa Cook over allegations of mortgage fraud, warning Friday: “What she did was bad, so I’ll fire her if she doesn’t resign.” Cook has denied wrongdoing, vowing not to be “bullied” out of office.

As Powell nears the end of his term, his final Jackson Hole speech underscored the tension between the Fed’s dual mandate–stable prices and maximum employment–at a time when tariffs and labor market weakness threaten to pull the economy in opposite directions.

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