Powell sends strongest signal yet that interest rate cuts are coming

Jerome H. Powell said the “balance of risks” across the economy had started to shift, raising the odds the central bank lowers borrowing costs at its next meeting in September, Reuters said.

Powell, the chair of the Federal Reserve, on Friday used a closely watched speech to send his strongest signal yet that the central bank is preparing to soon restart interest rate cuts, highlighting the labor market’s vulnerabilities even as inflation accelerates.

Powell held back from explicitly endorsing a reduction in borrowing costs at the Fed’s next meeting in September. But his emphasis on the prospects of a weakening economic backdrop made clear that a cut is likely next month.

“The balance of risks appears to be shifting,” Powell said in his final speech as Fed chair at an annual conference hosted by the Reserve Bank of Kansas City in Jackson, Wyo. With borrowing costs weighing on the economy, the labor market softening and inflation risks contained, “the shifting balance of risks may warrant adjusting our policy stance,” said the chair.

Powell highlighted the recent slowdown in monthly jobs growth, but questioned whether it was a function of a pullback in demand from companies or a reduction in the supply of workers resulting from President Trump’s immigration crackdown. He said that left the labor market in a “curious kind of balance” that warranted caution.