Fed Chair Powell: 'The time has come' ⏰

An important update from Jackson Hole ⛰️

Fed Chair Jerome Powell speaks from Jackson Hole. (Source: Kansas City Fed / YouTube)

After more than two years battling inflation, the Federal Reserve is now shifting its efforts to keep unemployment from rising much further.

“The upside risks to inflation have diminished,” Fed Chair Jerome Powell said on Friday. “And the downside risks to employment have increased.”

Speaking at the Kansas City Fed’s economic symposium in Jackson Hole, Powell acknowledged how the unemployment rate had risen to 4.3% in July, saying, “We do not seek or welcome further cooling in labor market conditions.“

“The time has come for policy to adjust,” he added. “The direction of travel is clear.“

Fed watchers see this language as a signal that the central bank’s first rate cut could come as soon as its September 17-18 Federal Open Market Committee meeting.

“The fact that the Chair made mention that the ‘direction of travel is clear’ suggests to us that not only are multiple 25 basis point (bps) rate cuts being anticipated at this point, but that the door was open to moving 50 bps to move the Funds rates closer to a level that is still restrictive relative to today’s economic and inflationary conditions, in our estimation,” BlackRock’s Rick Rieder said.

Rate cuts would be welcome news amid what’s been a cooling economy facing increasing risk of falling into recession.

“The risk of recession is now receding because the Fed is seeking to support the labor market,” Renaissance Macro’s Neil Dutta posted on X.

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