Jerome Powell says inflation in upward trend, unemployment in downward, 'challenging situation'
Fed Chair Jerome Powell hinted at a possible rate cut, saying: "With policy in restrictive territory, the baseline outlook and shifting balance of risks may warrant adjusting our policy stance."
Speaking at the Jackson Hole symposium, he stressed that risks to inflation are tilted to the upside and risks to employment to the downside in the near term, creating a difficult situation.
The event, hosted by the Fed's Kansas City branch and held annually since 1978, is taking place this year from August 21 to 23.
"When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate," Powell added.
"Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance."
He also stressed that the monetary policy is not on a preset course, and the Federal Open Market Committee members will make these decisions based solely on their assessment of the data and its implications for the economic outlook and the balance of risks, adding: "We will never deviate from that approach."
Regarding tariffs, he said the effects of tariffs on consumer prices are now clearly visible, noting that "Turning to inflation, higher tariffs have begun to push up prices in some categories of goods."
He estimated that Personal Consumption Expenditures (PCE) prices rose 2.6% in the year ending in July, with core PCE prices rising 2.9%, higher than the previous year.
Within the core, goods prices increased 1.1% in the last 12 months, a significant shift from the modest decline seen in 2024, he noted.
He pointed out that, in contrast, housing services inflation continues to fall, while non-housing services inflation remains slightly higher than what has historically been consistent with 2% inflation.
"Inflation has been above our target for more than four years and remains a prominent concern for households and businesses," he said.
