Federal Reserve Chair Jerome Powell signaled the possibility of a September rate cut in a Jackson Hole speech, while cautioning that inflation risks remain elevated due to tariffs.

He stressed the Fed would not allow temporary price spikes to fuel persistent inflation.

Powell also highlighted rising downside risks to employment as job growth slows sharply.

Markets reacted positively, with stocks rallying and bond yields falling as traders priced in a high likelihood of a September cut.

The Fed last held rates steady at 4.25%–4.50%, though officials remain split on whether conditions justify easing, Yahoo Finance has reported.

Powell also unveiled a policy shift reaffirming a strict 2% inflation target, abandoning the prior framework of averaging inflation around that level.