Tom Howell, Jr. | August 22, 2025

(The Washington Times) — Federal Reserve Chairman Jerome Powell is signaling that a long-awaited cut to interest rates may be warranted in September.

Mr. Powell, in his final address to an annual Fed symposium, said the central bank faces a “challenging situation” as it weighs possible price increases from tariffs and the risk of slowing employment.

“The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Mr. Powell said at the Jackson Hole, Wyoming, gathering.

Mr. Powell said the Fed’s Open Market Committee will make a final decision after a careful review of available data.

“We will never deviate from that approach,” Mr. Powell said.

The Dow Jones Industrial Average surged 800 points after Mr. Powell’s comments, and other Wall Street indexes rallied.

The central bankers’ symposium in Wyoming is an annual rite. But this year’s edition is in the spotlight, given President Trump’s pressure campaign on the Fed.

Mr. Trump has badgered Mr. Powell for months to give borrowers better terms through lower interest rates, only to be rebuffed by central bankers who fear price hikes from White House tariff policies.

The president says borrowers deserve better terms and that Mr. Powell is holding them back.

The Fed has a twin mandate of ensuring stable prices and maximum employment. Yet those goals seem in conflict right now, as central bankers balance possible price hikes from tariffs and a slowdown in hiring.

The U.S. added a weaker-than-expected 75,000 jobs in July. Also, the Bureau of Labor Statistics revised its May and June totals, concluding the country added 258,000 fewer jobs than initially thought.

Mr. Powell said there’s been a sharp falloff in immigrant workers, and labor force participation went down a bit.

At the same time, the chair said tariffs have raised prices on some categories of goods.

“The effects of tariffs on consumer prices are now clearly visible,” he said. “The question that matters for monetary policies is whether these price increases are likely to materially raise the risk of an ongoing inflation problem. A reasonable base case is that the effects will be relatively short-lived — a one-time shift in a price level.”

He said “one-time” does not mean “all at once,” and it will take time for tariff effects to filter through the marketplace.

“In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside — a challenging situation,” Mr. Powell said.

Nonetheless, a cut seems to be on its way.

The Fed had projected two rate cuts in 2025. But it hasn’t done any reductions so far, potentially increasing the odds of a cut.

CME Fedwatch on Friday projected a 91.3% chance the Fed would cut rates by 25 basis points, or .25%, after Mr. Powell delivered his relevant remarks in Wyoming.

“His Jackson Hole speech is about as clear-cut as the Fed gets,” Heather Long, the chief economist at Navy Federal Credit Union, said on X.

However, “he’s also signaling don’t bet on a bunch more rate cuts after that,” she said. “Fed leaders will still be watching what happens with tariff-induced inflation.”

The Fed has been cautious this year because of the fluctuating nature of Mr. Trump’s trade policy. The White House recently finalized tariffs ranging between 15% and 41% on more than 67 countries, raising levies to their highest levels in over a century.

Mr. Trump solidified the 10% blanket tariff on all imports and is implementing the 15% rate he negotiated with the European Union, Japan and South Korea.

The National Retail Federation and import-heavy industries have urged the Trump administration to moderate tariff levels, saying it will be difficult for companies to absorb the tariffs over the long term.

Mr. Powell said tariff levels might also change over time, prolonging the adjustment period.

Mr. Trump, meanwhile, is defending his tariff system as a way to gain leverage over other countries and reap billions for the Treasury.

The president is laying the groundwork for a post-Powell Fed when the chair’s term expires in May.

The Trump administration compiled a list of 11 candidates to replace Mr. Powell as Fed chair when his term expires in May.

Treasury Secretary Scott Bessent recently said he will begin interviewing candidates around Labor Day, hoping to whittle down the list for Mr. Trump.

Mr. Trump is also pressuring a Fed governor, Lisa Cook, to resign after a housing regulator accused her of mortgage fraud.

“What she did was bad, so I’ll fire her if she doesn’t resign,” Mr. Trump said Friday.

Ms. Cook said she won’t be “bullied” out of her position and planned to push back on the allegations.