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Fed Chair Powell Signals Openness to Rate Cut Amid Economic Risks
22 Aug
Summary
- Fed Chair Powell acknowledges risks of rising unemployment and higher inflation
- Powell suggests the Fed may adjust its policy stance, hinting at a potential rate cut
- Trump and allies have ramped up attacks on the Fed, calling for a rate cut
On August 22, 2025, Federal Reserve Chair Jerome Powell delivered a high-profile speech that was closely watched at the White House and on Wall Street. In his remarks, Powell acknowledged that the US economy is facing risks of both rising unemployment and stubbornly higher inflation, putting the Fed in a challenging position.
Typically, the Fed would cut its short-term interest rate to boost hiring, while keeping it high or raising it to fight inflation. However, Powell suggested that the Fed may be open to adjusting its policy stance in the coming months, hinting at a potential rate cut. He stated that "with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance."
This marks a more direct signal from Powell that the Fed is considering a rate cut, compared to his previous comments. However, he also emphasized that the Fed will continue to carefully evaluate jobs and inflation data before making any decisions, including at its next meeting in September.
The Fed's approach has frustrated financial markets, which have hoped for clearer signals of the central bank's next moves. It has also drawn criticism from President Donald Trump and his allies, who have ramped up attacks on the Fed, calling for a rate cut and even demanding the resignation of a Fed governor.
