In his final speech at the Federal Reserve’s annual symposium in Jackson Hole, WY, Fed Chair Jerome Powell suggested that the central bank is likely to cut its benchmark interest rate as soon as mid-September.

“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 Aug. 22 in his prepared remarks. “The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”

MDM’s 2Q25 MarketPulse Report (store link) 

Investors broadly took that to mean the Fed is likely to issue a rate cut when it meets Sept. 16-17, with perhaps more to follow after meetings in late October and early December.

Stocks jumped Friday following Powell’s speech, with the Dow closing up 1.9%, the S&P 500 up 1.5% and the tech-heavy Nasdaq Composite up 1.9%.

The Fed has maintained interest rates at 4.25%-4.5% since December 2024.

U.S. Federal Funds Interest Rate

source: tradingeconomics.com

In the Store: MDM’s U.S. MRO Market Trends Report 

Powell — whose term ends in May of next year — cautioned that the U.S. labor market is in a “curious state of balance” in that employee supply and demand are both slowing, making the market more tenuous than the current 4.2% unemployment rate suggests. That rate ticked up from 4.1% month-to-month in July’s jobs report, which showed that employment gains significantly decelerated. Powell cited a drop off in immigration amid Trump administration policies and a lower labor participation rate impacting the jobs rate.

The Fed has long maintained that its goal is to reduce the U.S. long-run inflation to 2%. That rate was at 2.70% in July, up from June’s 2.67%.

U.S. Inflation Rate

source: tradingeconomics.com

Powell added that the Trump administration’s tariffs policy “has begun to push up prices in some categories of goods,” evidenced by the latest Producer Price Index that showed July wholesale prices had the highest one-month increase in more than 3 years.

“We expect those effects to accumulate over coming months, with high uncertainty about timing and amounts,” Powell said regarding tariff impacts on inflation.

Watch Powell’s full speech below: