Fed’s Powell hints at rate cuts: ‘Time has come’ as labor market concerns grow

In his highly anticipated Jackson Hole speech, Fed Chair Jerome Powell made it clear that “the time has come” for a shift towards monetary easing. Although he did not specify the exact timing or pace of rate cuts, Powell highlighted the increasing need to support the labor market, indicating that Fed is ready to respond to “further weakening” in labor conditions.

Powell noted that the “upside risks to inflation have diminished,” while the “downside risks to employment have increased.” This marks a notable change in focus, with the Fed Chair emphasizing that the path forward will be determined by “incoming data,” the evolving economic outlook, and the balance of risks.

He reassured markets of Fed’s commitment to maintaining employment, asserting that the central bank will do “everything we can to support a strong labor market.” Powell expressed confidence that with a cautious reduction in policy restraint, the economy could return to the 2% inflation target without jeopardizing employment.

Powell also underscored the flexibility that the current policy rate offers, pointing out that it provides “ample room” to address any potential risks, including the possibility of further deterioration in labor market conditions.

Full speech of Fed’s Powell here.