Jackson Hole Speech
"Shifting Balance of Risks... Downside Risks to Employment Growing"
Jerome Powell, Chair of the U.S. Federal Reserve (Fed), suggested the possibility of a rate cut, stating that "it may be necessary to adjust our policy stance."
On August 22 (local time), during the annual Jackson Hole Economic Policy Symposium held in Wyoming, Powell said, "Policy is in a restrictive territory, and both our baseline outlook and the balance of risks are shifting." This statement indicates that the Fed, which has so far focused on curbing inflation risks, may shift its monetary policy stance to place greater emphasis on the risks of a slowdown in employment.
He assessed that downside risks in the labor market have recently increased.
Powell stated, "Overall, the labor market appears to be in balance, but this is a peculiar equilibrium resulting from a pronounced slowdown in both labor demand and supply." He added, "Such an unusual situation suggests that downside risks to the job market are growing." He further warned, "If these risks materialize, it could lead to a sharp increase in layoffs and a rise in the unemployment rate."
As a recent sign of labor market slowdown, he cited the July employment report released on the 1st. According to the report, nonfarm payroll growth in July fell sharply short of expectations, and job figures for May and June were also significantly revised downward.
However, Powell emphasized that inflation risks stemming from tariff policy still persist.
He said, "Our baseline scenario is that tariff-driven price increases are one-off," but expressed concern that "there is a possibility that new inflation dynamics could emerge, causing upward price pressures to persist for longer."
He concluded, "This is a risk we must assess and manage," indicating that the Fed will exercise greater caution in maintaining a balance between price stability and full employment.
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