“While the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly,” Powell told an audience of international economists and policymakers at the Fed’s annual conference in Jackson Hole, Wyoming. “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 stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance. Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said, noting that while tariffs are expected to drive prices higher the baseline case is for that impact on inflation to fade.

Powell’s comments open the door to a rate cut at the Fed’s September 16-17 meeting, but also put heavy weight on jobs and inflation reports that will be received before then. The next monthly jobs report comes on September 5, with data on consumer and producer prices due the week after.

U.S. stocks rose after the remarks, and traders assigned a nearly 90% probability of a quarter-point interest-rate cut next month, up from about 75% earlier.

Powell's remarks offered little guidance about how soon or how quickly rates might continue to move lower, likely stoking further pressure from President Donald Trump, who contends there is no risk of inflation and that the Fed should slash rates immediately. Trump has been pressuring the Fed with calls for Powell to resign that broadened this week to calls for Fed Governor Lisa Cook to also leave office.

Powell received a standing ovation at the start of his remarks, a coda to eight years which began and ended with withering criticism from Trump, who elevated him to chair in his first term but quickly soured on his unwillingness to keep monetary policy as loose as Trump wanted. The Trump administration is both searching for a replacement and pressuring Powell and other members of the Board of Governors to resign in hopes of appointing a majority of the seven-member body.

The Fed chair cannot be removed over disputes about interest rate decisions, and Powell has said he intends to serve out his full second term, which ends in May.

Alongside his update on the economy Powell released a new Fed strategic framework that emphasized that its maximum employment mandate hinges on price stability.

Trump in his first term promoted Powell from a seat on the board to chair, but soon began criticizing him. Powell was reappointed to a second four-year stint by President Joe Biden.

The Fed has kept its policy rate of interest on hold at the current 4.25%-to-4.50% range since December as officials began grappling with the likely impact the incoming administration's policies might have on inflation, which remains above the central bank's 2% target and is projected to rise as new import tariffs work their way into consumer prices.

Some policymakers, including Governor Christopher Waller, among those on a list of possible Powell replacements, argue the impact will be modest and short-lived, and that rate cuts are warranted now to protect a weakening job market.

Economic data since the Fed's last meeting have pulled officials in both directions, with an upcoming employment report for the month of August now figuring heavily in what the Fed says and does at its September meeting. The meeting will include new quarterly economic projections from policymakers who as of June anticipated the need for two quarter-point rate cuts this year.