Fed Chief Powell Opens Door for Interest Rate Cut in the USA

In his speech on Friday at the annual conference of the US Federal Reserve in Jackson Hole, Fed Chairman Jerome Powell pointed to increasing risks for the labor market and the danger of persistently high inflation. The balance in the labor market results from a significant slowdown in both the supply and demand for labor.

Fed Chairman Powell warns of the impact of Trump tariffs

The situation suggests that the risks to employment are increasing. "If these risks materialize, it can happen quickly," he said. However, Powell also warned of the inflation risks posed by tariffs. "It is also possible that the upward pressure on prices from tariffs could trigger a more persistent inflation dynamic," he said. "This is a risk that needs to be assessed and managed."

Much to the annoyance of US President Donald Trump, the Federal Reserve left the key interest rate at the end of July in the range of 4.25 to 4.50 percent. According to Powell, the Fed wanted to gain more clarity on how the tariff increases would affect inflation and the labor market. However, at the meeting, two policymakers voted against the majority in the Open Market Committee for a cut. This is unusual for the Federal Reserve, which last had two dissenters at the end of 1993.

Since then, Trump has increased the pressure on the independent central bank and its chairman. The Republican has long been demanding lower rates from Powell. The next Fed interest rate meeting will take place on September 16 and 17.

(APA/Red)

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