Fed: Powell Opens to Interest Rate Cut

Federal Reserve Chairman Jerome Powell, speaking at the central bank symposium in Jackson Hole, Wyoming, opened up to possible interest rate cuts, emphasizing the high level of uncertainty that is making the U.S. central bank's work difficult. While emphasizing that the labor market remains healthy and that the economy has shown "resilience," he stated that downside risks are increasing. At the same time, he stated that tariffs are creating the risk that inflation could rise again, a stagflationary scenario the Fed must avoid. With the Fed's benchmark interest rate a full percentage point lower than that set by Powell in his opening remarks a year ago, and with the unemployment rate still low, conditions allow "to proceed with caution in evaluating any changes to our policy stance."

Powell said that evolving economic risks have heightened the need for the Fed to cut rates. "The tightening of policy, the underlying outlook, and the shift in the balance of risks may warrant an adjustment in our stance," Powell explained.

Powell emphasized the importance of the Fed's independence , noting that "FOMC members will make these decisions based solely on their assessment of the data and their implications for the economic outlook and the balance of risks. We will never deviate from this approach."

"The effects of tariffs on consumer prices are now clearly visible. We expect these effects to accumulate over the coming months, with significant uncertainty about the timing and amount," the Federal Reserve chairman also said.

Wall Street reacted immediately to the announcement: higher gains accelerated, and bond yields fell after a cautious opening. According to Powell, labor market risks are increasing, although inflation concerns remain. The Dow Jones Industrial Average has gained nearly a percentage point since the opening, rising 1.6%, the Standard & Poor's 500 Index is up 1.24%, and the Nasdaq Index is up 1.3%. European stock markets are also up, with Piazza Affari among the top performers, up 1.1%.