In a noteworthy speech at the annual Jackson Hole symposium, Federal Reserve Chair Jerome Powell highlighted the escalating impacts of tariffs put in place by President Donald Trump. He emphasized that these tariffs are pushing consumer prices higher, a trend likely to persist in the near future.
While Powell’s overall message hinted that the Federal Reserve might lean towards cutting interest rates in September, he also expressed caution about the inflation risks associated with these tariffs. Throughout the summer, the Fed has kept a close eye on a mixed array of indicators concerning inflation and employment.
Something to note is how Powell criticized by Trump for not cutting rates sooner still reiterated that currently, monetary policy is quite “restrictive”. He suggested that the ongoing data trend “could lead to an adjustment in our policy stance.”
Key Takeaways from Jerome Powell’s Address
During an engaging session at the economic gathering in Jackson Hole, Wyoming, attended by around a hundred economic experts from across the globe, Powell was met with significant applause before beginning his remarks.
Powell remarked, “The impact of tariffs on consumer pricing is becoming more pronounced. We predict that these effects will continue to grow in the upcoming months, but the timing and extent still carry a lot of uncertainty.”
He added, “An important aspect for determining our monetary policy is whether these price hikes are squarely tied to sustained inflation problems. Most likely, these impacts could be temporary—a one-off adjustment. Nevertheless, we should keep in mind that temporary doesn’t mean instantaneous.”
Describing how tariff hikes will likely take time to influence supply chains and distribution networks, he warned that tariff rates are still changing, which may complicate adjustments further.
Powell recognized the potential for tariffs to spark a more perpetual inflationary trend, declaring, “It’s crucial that we monitor and address this risk diligently,” asserting, “We will not permit a one-time price spike to morph into ongoing inflation concerns.”
Current Inflation Trends
While inflation has slightly increased in recent months, it has declined from a peak of 9.1% just three years ago. Tariffs haven’t notably triggered inflation, despite worries from some economists, but they are nudging up prices for heavily imported goods such as furniture, toys, and footwear.
In July, consumer prices climbed by 2.7% compared to the previous year, surpassing the Fed’s usual target of 2%. Excluding the more volatile food and energy sectors, core inflation rose by 3.1%.
Regarding the job market, Powell noted that hiring has decelerated this year, while the unemployment rate continues to sit low. He mentioned that reduced immigration means fewer new jobs are necessary to keep unemployment rates stabilized. However, he also pointed out that these sluggish hiring trends raise the likelihood of an abrupt downturn with increased layoffs on the horizon.
September Rate Cuts Expected
Wall Street reacted positively to Powell’s comments regarding imminent interest rate cuts, signaling a possible market central to what investors and Trump have been advocating.
The S&P 500 rallied by 1.4%, thereby recovering its losses for the week following a successive five-day downturn after hitting an all-time high.
The Dow Jones Industrial Average soared by 716 points, equivalent to 1.6%, and appeared poised to surpass its previous highest mark from December. The Nasdaq composite saw a rise of 1.6% as of 10:25 a.m. ET.
According to Bankrate’s Senior Industry Analyst, Ted Rossman, Powell’s address certainly shifted market movements. “Post-speech, stocks zoomed up and bond yields dipped, indicating that the door is wide open for a potential September rate cut,” he stated. “Unless there’s an unexpected shock from forthcoming jobs and CPI reports, a rate cut in September appears likely.”
This update incorporates reporting from The Associated Press.
Note: Updated on 8/22/25, at 11:23 a.m. ET, with the latest information.
