Powell and the Fed as a whole have faced pressure from the Trump administration to cut rates over the past few months. Several officials, including Federal Housing Finance Agency (FHFA) Director Bill Pulte, have called for Powell’s resignation.
But Powell’s focus on slowing job growth and economic headwinds made clear to his audience that a reduction is likely. He offered remarks regarding changes in trade and immigration policies that are affecting both supply and demand, as well as shifts in tax, spending and regulatory policies.
“The balance of risks appears to be shifting,” Powell said, noting that high borrowing costs, a softening labor market and contained inflation risks could justify easing policy.
He pointed to weaker monthly job gains but said it was unclear whether the slowdown reflected weaker hiring demand or fewer available workers due to President Donald Trump’s immigration crackdown. The labor market, Powell said, is in a “curious kind of balance” that merits caution.
“The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said in his remarks, adding that the Fed is monitoring the unemployment rate and the strength of the U.S. job market.
At the same time, Powell acknowledged that inflation remains too high but argued that Trump’s tariffs are more likely to cause a temporary price spike than a lasting surge. “The reasonable base case is that the effects will be relatively short-lived,” he said.
“It is also possible, however, that the upward pressure on prices from tariffs could spur a more lasting inflation dynamic, and that is a risk to be assessed and managed.”
The Fed now faces the challenge of balancing its dual mandate of stable prices and maximum employment, Powell said, stressing that rate cuts will be measured and gradual. He described monetary policy as only “modestly” restrictive, suggesting limited room for reductions before hitting a “neutral” level that neither stimulates nor restrains growth.
“The Fed now appears focused on recalibrating policy toward a more neutral stance, with any future cuts likely to be gradual and data-dependent,” First American senior economist Sam Williamson said in a statement. “For the housing sector, even modest rate relief could improve affordability, revive buyer interest, and offer a much-needed boost to builders and lenders heading into the fall.”
The Fed’s monetary policy, which changes every five years, was also addressed in Powell’s speech. Its latest review scaled back its 2020 framework, dropping its emphasis on low-rate risks and inflation “makeup” strategies after the post-pandemic surge in prices.
The revised statement reaffirms flexible inflation targeting, clarifies the Fed’s approach to employment, and stresses that maintaining well-anchored inflation expectations is essential to balancing its dual mandate of price stability and maximum employment.
Powell’s remarks, the highlight of the three-day gathering of global central bankers, officials and academics, drew a standing ovation.
Following the speech, HousingWire Lead Analyst Logan Mohtashami reported that the 10-year Treasury yield fell and mortgage rates most likely will fall on Friday too. Several financial outlets reported that the Dow Jones posted a gain of nearly 800 points, along with several other key stocks that saw increases.
