Federal Reserve Chair Powell Says Change in Policy Stance May be Warranted

10:24 AM EDT, 08/22/2025 (MT Newswires) -- Federal Reserve Chairman Jerome Powell opened the door to interest rate reductions in his keynote address at the Jackson Hole Fed summit Friday, but stopped short of promising a reduction at the Sept. 16-17 Federal Open Market Committee meeting.

"In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside -- a challenging situation," Powell said. "When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate."

Powell noted that the current federal funds rate has been reduced by 100 basis points over the last year, giving the FOMC time to proceed carefully to consider further rate reductions.

"Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," Powell said.

Signs of tariff impacts are beginning to be seen in recent inflation data, Powell noted, but it is not certain how effects will be over the near term.

"The effects of tariffs on consumer prices are now clearly visible," Powell said. "We expect those effects to accumulate over coming months, with high uncertainty about timing and amounts. The question that matters for monetary policy is whether these price increases are likely to materially raise the risk of an ongoing inflation problem."

It will take some time for tariffs to work their way through the economy, Powell said, saying that it is possible that the impacts will be "short lived" though perhaps not all at once.

At the same time, recent employment data showed that employment growth has slowed, he noted.

"Overall, while the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers," Powell said. "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 emphasized that the FOMC will make decisions based on the incoming information and not any other factors.

"Monetary policy is not on a preset course," Powell said. "FOMC members will make these decisions, based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach."

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