The Federal Reserve signaled the possibility of a near-term interest-rate cut, possibly as soon as September. The decision must balance slowing economic growth—an annualized 1.2% rate in the first half of the year versus 2.5% last year—and weakening labor demand against persistent inflation pressures. Tariffs have begun to lift goods prices and could push inflation higher, prompting caution among policymakers. Political pressure from the White House favors deeper, faster cuts, while central bank officials indicate a preference for careful, slower easing. The current policy rate stands at 4.3%.
Powell, on the other hand, has suggested that a rate cut is likely for reasons quite different than Trump's: He is worried that the economy is weakening. His remarks on Friday at an economic symposium in Grand Teton National Park in Wyoming also indicated that the Fed will move carefully and cut rates at a much slower pace than Trump wants.
Powell pointed to economic growth that "has slowed notably in the first half of this year," to an annual rate of 1.2%, down from 2.5% last year. There has also been a "marked slowing" in the demand for workers, he added, which threatens to raise unemployment. Still, Powell said that tariffs have started to lift the price of goods and could continue to push inflation higher, a possibility Fed officials will closely monitor and that will make them cautious about additional rate cuts.
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