Federal Reserve Chair Jerome Powell on Friday used his Jackson Hole speech to acknowledge rising risks to U.S. employment, signaling the central bank may be preparing to shift its policy stance.
What Happened: His remarks marked the clearest indication yet that future rate cuts are possible if labor market weakness deepens.
Powell told central bankers on Friday that "downside risks to employment are rising," noting job growth has slowed to just 35,000 per month over the past three months, a sharp deceleration from 2024.
The unemployment rate edged up to 4.2% in July, while labor force participation has fallen, leaving the labor market vulnerable to shocks.
Economic growth has also cooled, with GDP expanding at just 1.2% annualized in the first half of 2025, compared to 2.5% last year.
The Fed chair emphasized that "monetary policy is not on a preset course" and said restrictive conditions could warrant adjustment if the slowdown accelerates.
Inflation remains a concern, with tariffs pushing headline PCE inflation to 2.6% in July, but Powell described these effects as temporary and dismissed fears of a wage-price spiral.
What Experts Are Saying: Kyle Chassé, founder of MV Global, described the shift as a defining moment.
“Powell just pulled F.A.I.T. (Flexible Average Inflation Targeting) out of the magic hat at Jackson Hole, which sets up the Fed's playbook to let inflation run hotter if it means saving jobs. Three months of weak jobs have the Fed spooked, and the market is already pricing a September cut as a done deal,” he told Benzinga.
“Powell just made his panic pivot, and the market is loving it. This speech marks the moment the Fed's pivot became undeniable, and smart money is already scrambling to get positioned for the new cycle of liquidity,” he added.
Speaking with Benzinga, David Siemer, CEO and co-founder of Wave Digital Assets, said the cautious dovish tone has implications for crypto markets.
"Powell's remarks today carefully hinted at a possible rate cut on the horizon, even while stressing caution on inflation. This creates an intriguing backdrop for crypto as a potential inflation hedge and diversification tool. While Powell didn't commit to a cut, he underscored that the path ahead is far from certain. In that ambiguity lies crypto's appeal,” he said.
For investors, the Jackson Hole address underlined a broader pivot in the Fed's focus, from prioritizing inflation control to guarding against weakening jobs and growth.
With policy now "in restrictive territory," markets are watching closely to see whether September delivers the first adjustment in nearly a year.
Price Action: Bitcoin (CRYPTO: BTC) has surged to an intra-day high of $117,104, Ethereum (CRYPTO: ETH) is up to $4,651
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