In his speech at Jackson Hole, Fed Chair Jerome Powell confirmed the likelihood of cutting the US base interest rate by 25 basis points in September but was cautious about the next cut.

Powell emphasized that monetary policy is in a tightening phase, warning of risks related to employment and changing inflation, while reflecting on new developments such as tariff impacts and updates to the Fed's operational strategy.

MAIN CONTENT

  • The Fed is likely to cut interest rates by 25 basis points in September, but not to start a long-term rate-cutting cycle.

  • The impact of tariffs weighs heavily on consumer prices, posing a risk of stagflation that needs to be tightly controlled.

  • The Fed changes its strategy, abandoning the 'makeup strategy' for a more flexible approach to maintain stable inflation expectations.

Will the Fed really cut interest rates in September?

Jerome Powell confirmed a high likelihood that the Fed will cut interest rates by 25 basis points in September to support the US economy in the context of many emerging risks.

He emphasized that the current policy is in a tightening phase, and the labor market remains strong, making the Fed cautious about cutting rates in consecutive rounds. This is a cautious step reflecting a balance between stimulating growth and controlling inflation.

This means the Fed wants to keep interest rates at just the right level to avoid fueling inflation while still supporting a sustainable recovery in the job market and the overall economy.

What is the impact of tariffs on prices and inflation?

Fed Chair Powell highlighted the clear impact of tariffs on consumer prices, calling it a significant rising pressure on inflation.

He also warned of high uncertainty in the coming months as the effects of tariffs accumulate, while noting the risk of economic stagnation accompanying high inflation – a situation the Fed seriously wants to prevent.

The tariffs are causing increased costs for imported goods, putting even more pressure on consumers. The Fed must carefully consider to avoid policies that could prolong or worsen this situation.

How has the Fed updated its central banking operational strategy?

The Fed officially abandoned the 'makeup strategy' applied since 2020, which allowed inflation to exceed the 2% target to compensate for lower months, shifting to a more flexible approach in inflation targeting.

The reason for the change is due to fundamental changes in the US economy including rising inflation pressure and trade, tax, and immigration policies having a significant impact on economic activity.

Powell emphasized the Fed's commitment to tackling inflation with strong actions to keep this expectation stable in the long term. The adjustments in procedures aim to enhance flexibility and better fit the current context.

"We emphasize a strong commitment to ensure long-term inflation expectations are anchored firmly."
– Jerome Powell, Chair of the FED, speech at the Jackson Hole conference, 11:00 PM on 22/8/2025 (Vietnam time)

How did the stock and cryptocurrency markets react after Powell's speech?

The US stock market surged immediately after Powell's announcement, with the Dow Jones index surpassing the record level of 45,548, gaining over 600 points.

Cryptocurrency-related stocks also tend to rise as low interest rate expectations create favorable conditions for liquidity and investment risks.

However, the Fed's caution regarding inflation makes investors aware that the road ahead still has many challenges and volatility.

"Lower interest rates will improve liquidity and increase risk acceptance, positively supporting the cryptocurrency market."
– Financial analyst, Q3/2025 market report

Frequently Asked Questions

Is the Fed definitely going to cut interest rates in September?

Powell stated a high probability but not a long-term cutting cycle, as risks regarding employment and inflation still exist.

Is the impact of tariffs on inflation significant?

Tariffs are driving up consumer prices, putting pressure on inflation and posing a risk of economic stagnation.

Why did the Fed abandon the 'makeup strategy'?

Due to changes in the economy with high inflation pressure and trade policies, the Fed needs a more flexible strategy to control inflation expectations.

How does the cryptocurrency market react to the prospect of lower interest rates?

Lower interest rates increase liquidity and investment risk, boosting capital flows into cryptocurrency assets.

What will the Fed do to control inflation in the future?

The Fed is committed to taking strong action and adjusting policies in a timely manner to keep long-term inflation expectations stable.

Source: https://tintucbitcoin.com/fed-powell-bao-tin-hieu-giam-lai/

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