Federal Reserve Chair Jerome Powell signaled that the central bank may soon adjust its monetary policy, potentially paving the way for a rate cut in September.
In a highly anticipated Friday morning speech at the Federal Reserve Bank of Kansas City's Economic Symposium in Jackson Hole, Wyo., Powell said when he gave the same speech last year, interest rates were higher and the specter of inflation still very real. But he added that it might make sense for the Federal Open Market Committee to shift its focus to a softening labor market in light of weaker hiring statistics over the last few months.
"Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance," said Powell. "Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance."
Powell said that uncertainty is building in the labor market, particularly pointing to the
"This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment," Powell said.
Regarding inflation, Powell said higher tariffs are starting to push up prices of goods, but added that there is a likelihood that the effect "will be relatively short lived."
"We cannot take the stability of inflation expectations for granted," he said."Come what may, we will not allow a one-time increase in the price level to become an ongoing inflation problem."
Powell's speech comes as the central bank has come under unprecedented and increasing pressure from the White House to lower interest rates.
President Trump — who has
Federal Housing Finance Agency Director Bill Pulte this week also
