The Federal Reserve is likely to cut interest rates for the first time this year at its next meeting in September, Fed Chair Jerome Powell said Friday. The move is likely to please President Donald Trump, who has aggressively pushed for lower rates, but Powell indicated that a weak job market — not Trump’s criticism — will drive the decision.
“Downside risks to employment are rising,” Powell said at an annual conference hosted by the Federal Reserve Bank of Kansas City in Jackson, Wyoming. “And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.”
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A rate cut could stimulate business growth and hiring, while also boosting consumer spending.
The Fed last changed its benchmark rate in December 2024. Powell did not indicate how much the central bank might cut rates next month or whether additional reductions might soon follow. He said only that the Fed would “proceed carefully.”
Immigration, trade policies hurt economy: Powell
Powell suggested that Trump administration policies on immigration and trade have contributed to uncertain economic conditions.
He said job growth may have slowed because Trump’s immigration slowdown has diminished the workforce. At the same time, he said, employers have reduced their demand for workers, creating a “curious kind of balance” that requires a cautious reaction from the Fed.
He also said Trump’s tariffs on imported goods have contributed to an inflation rate that, in his view, remains too high. He said the tariffs may cause “a one-time shift in the price level.” But “of course, ‘one-time’ does not mean ‘all at once,’” he added. “It will continue to take time for tariff increases to work their way through supply chains and distribution networks.”
Markets higher on news
Stocks surged immediately after Powell’s remarks.
The Dow Jones Industrial Average rose 1.7%, while the S&P 500 climbed 1.4% and the Nasdaq Composite was up about 1.8%.
Trump did not immediately respond after Powell’s speech, other than to post on his Truth Social account, “MAKE AMERICA GREAT AGAIN!”
Trump has repeatedly criticized Powell and other members of the Federal Reserve, demanding deep cuts in interest rates to stimulate the economy, despite persistently high inflation rates. He has publicly weighed firing Powell, although it is unclear whether he has the legal authority to do so. He also suggested that Powell was responsible for large cost overruns for renovations to the Federal Reserve headquarters in Washington.
Powell’s term expires in May 2026. Trump said Friday he would fire Federal Reserve Governor Lisa Cook, appointed by former President Joe Biden, over alleged mortgage fraud. She denies the allegation and says she has “no intention of being bullied.”
