Dollar fell sharply after Fed Chair Jerome Powell hinted that the case for rate cuts may soon strengthen. Speaking at Jackson Hole, Powell highlighted Fed’s growing policy trade-off: inflation risks remain tilted upward while downside risks to employment are building. He stressed that the Fed’s framework requires carefully balancing these competing pressures.
Powell observed that policy is already significantly closer to neutral compared to a year ago, with unemployment and other labor measures steady enough to permit a cautious approach.
Importantly, Powell said that with monetary policy already in restrictive territory, the evolving balance of risks “may warrant adjusting our policy stance.” Markets took this as a subtle hint that easing could be on the horizon, accelerating Dollar losses across the board.
Full speech of Fed’s Powell here.
