Powell Signals Possible September Rate Cut as Inflation Cools

Federal Reserve Chair Jerome Powell signaled that the central bank could begin cutting interest rates as soon as September, pointing to continued progress in bringing inflation back toward the Fed’s 2% target and signs of a cooling labor market.

Powell’s remarks reinforced expectations that policymakers are preparing to ease monetary policy after an extended period of restrictive rates. Recent data showed core personal consumption expenditures (PCE) inflation holding steady at 2.6% in July, a reading that suggests price pressures are moderating even if they remain above the Fed’s goal.

The labor market has also shown signs of softening, adding to the case for a policy shift. While the Fed has kept rates elevated to curb inflation, officials have increasingly acknowledged the need to balance price stability with support for economic growth and employment.

Financial markets quickly adjusted to Powell’s comments, with traders now pricing in more than a 90% probability of a 25-basis-point rate cut at the Fed’s next meeting. Investors will be watching upcoming economic reports closely for further confirmation that inflation is easing enough to justify the move.

A September cut would mark a notable pivot in the Fed’s policy stance and could influence borrowing costs across the economy, from mortgages to business loans.