MORAN, Wyo.—Federal Reserve Chair Jerome Powell signaled Friday that the central bank could be edging closer to lowering interest rates, even as he warned of the difficult economic backdrop confronting policymakers.
Speaking at the Kansas City Fed’s annual Jackson Hole symposium, Powell described an unsettling mix of risks. “In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside—a challenging situation,” he said in prepared remarks.
The comment pointed to the possibility of a stagflationary environment, marked by lackluster growth and high unemployment, a scenario the Fed has long tried to avoid.
Still, Powell acknowledged that monetary policy may already be too tight, opening the door to potential cuts. “Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he said.
After keeping interest rates steady for about nine months, officials now face mounting signs of cooling growth, a weakening labor market, and renewed price pressures. Powell’s words suggest the central bank is trying to balance those competing threats without oversteering in either direction.
The Fed chair also pushed back against suggestions that politics might influence policy. Under near-constant attack from President Donald Trump for not lowering rates quickly enough, Powell stressed that officials remain committed to an evidence-driven approach.
“Monetary policy is not on a preset course,” he said. Fed officials, he added, “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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