Federal Reserve Chair Jerome Powell used his annual Jackson Hole address on Friday to warn that a “shifting balance of risks” may require easier monetary policy, signalling the central bank could consider an interest-rate cut when officials meet on 16-17 September. With the policy rate still in restrictive territory, Powell said the downside risks to employment are rising even as inflation pressures linger. Powell highlighted an unusual labour-market equilibrium caused by simultaneous declines in the supply of and demand for workers. Non-farm payrolls have grown by an average of only 35,000 a month over the past quarter and the unemployment rate has inched up to 4.2%. He cautioned that such conditions can “quickly” translate into higher layoffs if growth weakens further. Tariffs are now “clearly” pushing consumer-goods prices higher, Powell said. Headline personal-consumption-expenditure prices rose 2.6% in the 12 months to July, while the core index advanced 2.9%. Although the tariff impact is expected to be temporary, Powell stressed the Federal Open Market Committee cannot take stable inflation expectations for granted. Alongside the speech, the Fed unanimously adopted a revised Statement on Longer-Run Goals and Monetary Policy Strategy. The new framework abandons the 2020 flexible average-inflation-targeting regime and its ‘make-up’ language, returns to standard flexible inflation targeting, removes the zero-lower-bound focus and pledges forceful action to keep long-term inflation expectations anchored. The document also clarifies that pre-emptive moves remain possible if a tight labour market threatens price stability. Powell acknowledged that first-half GDP growth slowed to 1.2%, largely because of weaker consumer spending, underscoring the need for a balanced approach. Futures markets responded by raising the probability of a September rate cut.