Washington, Aug. 25, 2025 – Federal Reserve Chair Jerome Powell on Friday signaled the possibility of an interest rate cut at the U.S. central bank’s meeting next month, citing rising risks to the job market while cautioning that inflation remained a concern and no decision was final.
Although his remarks were less explicit than those delivered ahead of last year’s Jackson Hole conference, investors quickly increased bets on a rate reduction.
Markets are now pricing in an 85% probability of a quarter-point cut at the September 16–17 meeting, up from 75% earlier in the day.
Several Wall Street analysts also revised their forecasts, bringing forward expectations for rate cuts to September and projecting a total of 50 basis points of easing by year-end, from the current 4.25%–4.50% range.
“The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance,” Powell said at the Fed’s annual symposium in Wyoming.
“Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
His comments placed added importance on upcoming U.S. labor and inflation data, including the September 5 employment report. Powell warned that this “curious kind of balance” in the labor market posed rising downside risks, which could materialize quickly.
He also flagged that tariffs may temporarily lift prices, but said their inflationary impact could fade over time. The debate within the Fed itself remains divided.
Kansas City Fed President Jeffrey Schmid and Cleveland Fed President Beth Hammack expressed caution about cutting rates while inflation remains above target.
Others, including Governor Christopher Waller and San Francisco Fed President Mary Daly, have advocated for near-term easing to cushion a weakening labor market. (Comercio Partners)
