Jerome Powell Jackson Hole Speech 2025: 5 key takeaways from Fed Chair’s remarks on inflation, rates, US economy

In his Jackson Hole speech, US Federal Reserve Chair Jerome Powell gave feeble hints that “policy adjustments” may occur in the coming months but warned that risks of higher inflation remain.

In his eighth and final speech as Fed Chair at the annual huddle, Powell highlighted the risks emanating from US tariffs and tighter immigration policies, which have raised the risk of inflation and a slowdown in labour force growth.

Let’s take a look at the Fed Chair’s remarks on inflation, rates, and the US economy.

Jerome Powell Jackson Hole Speech: 5 key takeaways

1. Subtle hints for a rate cut

Powell pointed out that the US central bank faces a challenging situation in which “risks to inflation are tilted to the upside, and risks to employment to the downside.”

In such a situation, he said the Fed’s framework warrants it to balance both sides of its dual mandate to foster maximum employment and stable prices.

“Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labour market measures allows us to proceed carefully as we consider changes to our policy stance. Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” said Powell.

He, however, added that FOMC members will make decisions based solely on the incoming data and its implications for the economic outlook and the balance of risks.

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2. Labour market not flashing acute stress signals

Powell underscored that the jobs market slowdown is bigger than assessed earlier. He, however, added that weaker job growth hasn’t created much slack in the labour market. The unemployment rate is still historically low and has been stable for the past year.

Powell highlighted that other labour market indicators, such as quits, layoffs, the ratio of vacancies to unemployment, and nominal wage growth, are also little changed or have softened only modestly.

“The July employment report released earlier this month showed that payroll job growth slowed to an average pace of only 35,000 per month over the past three months, down from 168,000 per month during 2024. This slowdown is much larger than assessed just a month ago, as the earlier figures for May and June were revised down substantially,” said Powell.

“But it does not appear that the slowdown in job growth has opened up a large margin of slack in the labour market—an outcome we want to avoid. The unemployment rate, while edging up in July, stands at a historically low level of 4.2 per cent and has been broadly stable over the past year,” he said.

3. Tariffs, immigration policies pose new challenges to the US economy

Powell highlighted risks associated with higher tariffs and tighter immigration policy in his speech. He emphasised the uncertainty of how these policies will finally affect the US economy.

“Significantly higher tariffs across our trading partners are remaking the global trading system. Tighter immigration policy has led to an abrupt slowdown in labour force growth,” said Powell.

“Over the longer run, changes in tax, spending, and regulatory policies may also have important implications for economic growth and productivity. There is significant uncertainty about where all of these polices will eventually settle and what their lasting effects on the economy will be,” Powell said.

4. Inflation rising slowly; effects visible now

Powell underscored that higher tariffs have started to raise the prices of some goods. While the effect of tariffs will accumulate over the coming months, Powell highlighted that there is much uncertainty about whether these price rises will likely significantly raise the risk of an ongoing inflation problem.

“A reasonable base case is that the effects will be relatively short-lived—a one-time shift in the price level. Of course, one time does not mean all at once. It will continue to take time for tariff increases to work their way through supply chains and distribution networks. Moreover, tariff rates continue to evolve, potentially prolonging the adjustment process,” said Powell.

“It is also possible that the upward pressure on prices from tariffs could spur a more lasting inflation dynamic. Another possibility is that inflation expectations could move up, dragging actual inflation with them. Come what may, we will not allow a one-time increase in the price level to become an ongoing inflation problem,” he emphasised.

5. Fed to stick to 2% inflation target

The Fed Chair emphasised that the central bank will remain focused on achieving the 2 per cent inflation target, which is low enough to ensure that inflation is not a concern in household and business decision-making.

Powell said the Fed’s commitment to this target is a key factor helping keep longer-term inflation expectations well anchored.

“Experience has shown that 2 per cent inflation is low enough to ensure that inflation is not a concern in households while also providing a central bank with some policy flexibility to provide accommodation during economic downturns,” said Powell.

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