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By Shane Croucher
Senior Editor
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Federal Reserve Chair Jerome Powell warned that President Donald Trump's tariffs are pushing consumer prices higher and would continue to do so over the coming months.
Powell gave the warning in his annual Jackson Hole speech on Friday, though markets took the overall message of his address as a signal that the central bank would cut interest rates at the next opportunity in September.
So far, the Federal Reserve has resisted cutting rates over concerns that tariffs would fuel an inflationary spike, and policymakers were closely watching the economic data over the summer, which gave a mixed picture across inflation and employment.
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The Fed chair, who Trump has repeatedly and sharply criticized for not cutting rates sooner, noted that monetary policy is currently "restrictive" and that, taken together, the data "may warrant adjusting our policy stance."
What did Jerome Powell Say?
Powell spoke at the Fed's annual economic symposium in Jackson Hole, Wyoming, a conference with about 100 academics, economists, and central bank officials from around the world.
He was given a standing ovation before he spoke in what was his final address at the event as Fed chair before his term ends in 2026.
"The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over coming months, with high uncertainty about timing and amounts," Powell said.
"The question that matters for monetary policy is whether these price increases are likely to materially raise the risk of an ongoing inflation problem. A reasonable base case is that the effects will be relatively short-lived—a one-time shift in the price level. Of course, 'one-time' does not mean 'all at once.'
"It will continue to take time for tariff increases to work their way through supply chains and distribution networks. Moreover, tariff rates continue to evolve, potentially prolonging the adjustment process."
Powell cautioned that it is possible the "upward pressure on prices from tariffs could spur a more lasting inflation dynamic, and that is a risk to be assessed and managed."
"Come what may, we will not allow a one-time increase in the price level to become an ongoing inflation problem," he said.
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Sticky Inflation
Inflation has crept higher in recent months, though it is down from a peak of 9.1 percent three years ago.
Tariffs have not spurred inflation as much as some economists worried, but are starting to lift the prices of heavily imported goods such as furniture, toys, and shoes.
Consumer prices rose 2.7 percent in July from a year ago, above the Fed's target of 2 percent. Excluding the volatile food and energy categories, core prices rose 3.1 percent.
Regarding the job market, Powell noted that even as hiring has slowed sharply this year, the unemployment rate remains low. He added that with immigration falling sharply, fewer jobs are needed to keep unemployment in check.
Yet with hiring sluggish, the risk of a sharper downturn, with rising layoffs, has risen, Powell said.
September Rate Cut 'Is Coming'
Wall Street rallied after Powell indicated the cuts to interest rates that investors and Trump have been craving may be coming soon.
The S&P 500 jumped 1.4 percent and erased all of its loss for the week. That's following five straight modest losses after it set an all-time high last week.
The Dow Jones Industrial Average soared 716 points, or 1.6 percent, and was on track to blow past its own all-time high, which was set in December. The Nasdaq composite was up 1.6 percent, as of 10:25 a.m. ET.
Bankrate Senior Industry Analyst Ted Rossman said Powell's speech "was definitely a market-mover."
"Stocks have rocketed higher and bond yields are down as the door seems wide open for a September rate cut," Rossman said.
"While Powell and his Fed colleagues will surely monitor the upcoming jobs and CPI reports closely, unless there's a big surprise in one or both of those, it sounds like a September rate cut is coming."
This article includes reporting by The Associated Press.
Update 8/22/25, 11:23 a.m. ET: This article was updated with additional information.
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