Wall Street jumped higher on Friday after Federal Reserve Chair Jerome Powell’s remarks hinting at a possible interest rate cut in September. Speaking at the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole, Wyoming, Powell said the central bank has eased policy to support economic growth as the labour market shows signs of weakening.
“Downside risks to employment are rising,” Powell said in his keynote speech, noting that the Fed has held interest rates steady for eight consecutive months. He added that the impact of tariffs imposed by President Trump on inflation is likely to be short-lived.
“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he stated. According to Reuters, traders now assign nearly a 90% probability of a quarter-point rate cut at the Fed’s September 16–17 meeting, up from about 75% before Powell’s speech.
Powell elaborated that the labour market is in “a curious kind of balance”, with both the supply of and demand for workers slowing. The Fed chair further warned that this unusual dynamic increases the risk of job losses, which could occur rapidly if conditions deteriorate further.
At the same time, Powell acknowledged the possibility that tariffs could spark a more lasting inflationary trend, a risk the Fed must weigh carefully. “The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes,” he noted.
Market participants are now watching closely for upcoming economic data that could shape the Fed’s decision. The next jobs report, due on September 5, along with consumer and producer price data the following week, will be critical in determining whether the Fed moves ahead with a rate cut.