Fed Chair Powell Signals September Rate Cut at Jackson Hole, Warns on Inflation Risks

Jerome Powell’s Jackson Hole speech gave traders clarity on what’s next for U.S. rates and a reason for crypto markets to cheer.

Speaking at the Fed’s annual Jackson Hole symposium, Powell said a 25bps rate cut in September is highly likely. But he also made it clear this isn’t the start of a long series of cuts.

A Likely Cut, But With Caution

Powell told the audience that the Fed’s policy is already “in restrictive territory” and the risks around jobs and inflation are shifting.

“Downside risks to employment are increasing,” he said, but stressed that the labor market is still strong and the economy has shown “resilience.” That’s why the Fed isn’t ready to promise multiple cuts after September.

Tariffs Put Pressure on Prices

One of Powell’s biggest concerns is inflation linked to Trump’s tariffs.

“The effects of tariffs on consumer prices are now clearly visible,” he said, adding that the Fed expects those effects “to accumulate over the coming months with high uncertainty.”

Powell noted that the impact might be temporary, but he also flagged the danger of stagflation – the mix of high inflation and weaker growth that the Fed is determined to avoid.

Fed Updates Its Playbook

Alongside his outlook, Powell announced changes to the Fed’s operating framework.

The central bank has dropped the 2020 “makeup strategy” that allowed inflation to overshoot the 2% target. Instead, it has returned to a flexible inflation-targeting approach.

“Our revised statement emphasizes our commitment to act forcefully to ensure that longer-term inflation expectations remain well-anchored,” Powell said.

The shift reflects how the U.S. economy has changed over the past five years, with higher inflation pressures and major shifts in trade, tax, and immigration policy.

Stocks and Crypto React

Markets rallied after Powell’s speech. The Dow surged more than 600 points, reaching a record high of 45,548 while US-listed crypto stocks climbed as investors welcomed the prospect of lower rates.

For crypto, Powell’s signal matters. Lower rates tend to improve liquidity and risk appetite, both of which support digital assets. Still, with the Fed staying cautious on inflation, traders know the path ahead won’t be straightforward.