Federal Reserve Chair Jerome Powell signaled that interest rates could begin falling again, warning that new job reports indicate the U.S. economy may be slowing.
On Friday, speaking at a major gathering of investors and Federal Reserve Board members in Jackson Hole, Wyoming, Powell explained that the Fed has been cautious about cutting rates.
Powell noted that lowering interest rates can help fuel job growth; however, lower rates can also lead to higher inflation.
After the annual inflation rate surged to 9% in 2022, the Fed implemented its highest federal interest rate in two decades. The central bank was able to do so as unemployment remained low and job creation was robust.
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But recent job reports suggest that hiring in the U.S. economy is slowing, while inflation remains above the Fed’s 2% target.
“Risks to inflation are tilted to the upside, and risks to employment are tilted to the downside — a challenging situation,” Powell said.
Complicating matters, Powell suggested inflation could rise as new tariffs on imported goods are imposed. However, with weaker job numbers, he said “the balance of risks appears to be shifting” between employment and price stability.
Powell alone does not have the power to raise or lower interest rates. At the Fed’s last meeting in late July, when members voted to keep rates steady, two members dissented — marking the first time in 30 years that two opposing votes were cast on the same decision.
In September 2024, the Fed cut rates from a 23-year high by 50 basis points, followed by two 25‑basis‑point reductions later that year.
Since President Donald Trump took office in January 2025, the Fed has not adjusted rates — a stance that has angered Trump, who argues that high interest rates are hurting the economy. Powell has countered that the rates remain necessary due to elevated inflation and a stable job market.
