Jerome Powell just cracked open the door to lower interest rates, and markets are buzzing. Speaking at the Kansas City Fed’s annual conference in Jackson, Wyoming, on Friday, the Federal Reserve chair hinted at a policy shift that could ease the financial squeeze on hardworking Americans. His words carry weight, but is this a genuine pivot or just more Fed posturing?
Breitbart reported that Powell suggested the Fed might cut rates as early as September 2025, citing a cooling labor market and sluggish economic growth.
The central bank, which held rates steady in 2025 after a one-point cut in 2024, is now eyeing looser policy to counter slowing job gains and a GDP growth rate limping at 1.2% for the first half of 2025.
The labor market, Powell noted, is in a “curious kind of balance.” Demand for workers is down, supply is shrinking, and the risk of layoffs looms larger than a progressive tax hike. If jobs keep drying up, the Fed’s restrictive stance might finally get the boot it deserves.
“The balance of risks appears to be shifting,” Powell declared, signaling a rethink of the Fed’s tight grip.
That’s a polite way of admitting the economy’s not exactly roaring like a Trump rally. But will a rate cut actually fix the underlying issues, or just slap a Band-Aid on a deeper wound?
GDP growth has slowed to a measly 1.2% in 2025’s first half, a far cry from the robust expansion Americans crave.
Inflation, still above the Fed’s 2% target, sits at 2.6% per the personal consumption expenditure price index for June 2025, with core prices at 2.8%. Those numbers aren’t catastrophic, but they’re enough to make families wince at the grocery checkout.
Tariffs, a hallmark of President Trump’s economic playbook, are driving up goods prices. Powell acknowledged their “clearly visible” impact, predicting more price hikes in the months ahead. Yet, he insists the Fed won’t let these increases spiral into a full-blown inflation crisis—good luck threading that needle.
“Higher tariffs have begun to push up prices,” Powell said, noting their effect on consumer goods. He’s right—tariffs sting, but they’re also a calculated move to protect American industries from foreign freeloaders. The question is whether the Fed can balance this without choking off growth.
Powell’s speech wasn’t just about economics; it was a tightrope walk under political fire. President Trump has been hammering the Fed, slamming high rates for crippling housing and manufacturing. His public push for aggressive cuts and criticism of Powell’s leadership adds a spicy twist to the Fed’s deliberations.
Earlier in the week of August 22, 2025, Trump even urged the Fed’s board to wrest control from Powell. That’s classic Trump—calling out bureaucrats for dragging their feet while Main Street struggles. Whether you love or hate his style, the pressure’s clearly rattling the Fed’s cage.
Markets didn’t waste time reacting to Powell’s remarks. Stocks surged, Treasury yields dipped, and the dollar took a hit, as investors bet big on a September rate cut.
The CME Fedwatch tool now pegs the odds of that cut at 91%, up from 75% before Powell opened his mouth.
Powell’s not committing to anything rash, though. “Monetary policy is not on a preset course,” he said, emphasizing that the Fed’s decisions will hinge on data, not political noise. That’s a diplomatic dodge, but it’s hard to ignore the shadow of Trump’s demands looming large.
The Fed’s been in restrictive mode, Powell admitted, to gauge tariffs and labor market shifts. But with inflation still above target and tariffs jacking up prices, the central bank’s playing a high-stakes game. One wrong move, and we’re either back to runaway inflation or stuck in a jobless rut.
“We cannot take the stability of inflation expectations for granted,” Powell warned, vowing to keep price spikes from becoming a chronic issue.
That’s a noble goal, but when families are already stretched thin, a little relief on interest rates could go a long way. The Fed’s obsession with inflation shouldn’t trump the need for jobs.
The labor market’s fragility is the real story here. With demand and supply both faltering, the risk of layoffs could hit like a freight train if the Fed doesn’t act. Powell’s hint at a rate cut suggests he’s finally hearing the alarm bells Main Street’s been ringing.
