Powell Signals Cautious Path to Interest-Rate Cuts, Markets Rally

Federal Reserve Chair Jerome Powell, during his 2025 Jackson Hole symposium speech in Wyoming, indicated that conditions may warrant future interest-rate cuts. Powell began by stating, “Our policy stance remains restrictive,” but acknowledged that risks to the economy now appear tilted towards higher unemployment, signaling a possible easing of monetary policy.

While inflation remains above the Fed’s 2% target, Powell emphasized a cautious approach moving forward. His balanced tone reassured investors, leading to a positive market reaction. The Dow Jones rose by approximately 1.6%, while the S&P 500 and Nasdaq indexes also climbed alongside falling Treasury yields.

Following Powell’s speech, the market-implied probability of an interest-rate cut by September surged to around 89%.

Despite signaling potential cuts, Powell reaffirmed the Federal Reserve’s independence from political pressure, emphasizing that decisions will be data-driven. This was a clear message amidst calls for rate cuts from former political leaders.

For more detailed analysis, you can read the full coverage on Reuters.