Federal Reserve Signals Imminent Interest Rate Cuts Amid Economic Uncertainty

Federal Reserve Chair Jerome Powell announced the need for imminent interest rate cuts due to rising risks in the job market and nearing the Fed's 2% inflation target. Market reactions included a stock gain, falling bond yields, and a lowered dollar index. Experts foresee significant rate cuts if labor market weakness continues.

Federal Reserve Chair Jerome Powell declared Friday that the U.S. central bank is poised to cut interest rates, citing increased risks to the job market and proximity to the Fed's 2% inflation target as key factors for the policy shift. He made this statement during the Kansas City Fed's annual economic conference in Jackson Hole, Wyoming.

Powell emphasized, "The upside risks to inflation have diminished. And the downside risks to employment have increased." This clear indication of potential rate cuts prompted immediate reactions in financial markets: the S&P 500 extended its gains to 0.92%, benchmark U.S. 10-year note yields fell to 3.812%, and the dollar index dropped by 0.394%.

Analysts including Peter Cardillo from Spartan Capital Securities and Kim Forrest from Bokeh Capital Partners responded positively to Powell's dovish tone, predicting a 50-basis-point rate cut in September if labor market conditions continue to weaken. Marc Chandler of Bannockburn Global Forex offered a more cautious outlook, focusing on the need for data-driven decisions by the Fed.

(With inputs from agencies.)