Powell Spots Job Worries, Opening Path to Rate Cut

Tariffs' effect on prices visible, may accumulate in months ahead: Fed chairman

- Nick Timiraos

Federal Reserve Chair Jerome Powell opened the door for the central bank to cut rates as soon as its meeting next month when he said the prospect of a sharper slowdown in the job market might reduce concerns that cost increases due to tariffs will fuel inflation.

Throughout the year, Powell and his colleagues have held rates steady, pointing to a solid labor market and uncertainty over the inflation outlook given large tariff hikes. But Powell suggested the outlook was changing in a direction that could justify a resumption of rate cuts in a widely watched address at a conference in Wyoming on Friday.

"The balance of risks appears to be shifting," Powell said. While labor markets appear to be stable, "it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers."

That has led to an "unusual situation" in which the risks of worse-than-expected labor-market outcomes are rising, he said. "And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment," Powell said.