Jerome Powell, chairman of the Federal Reserve, opened the door to a possible rate cut as early as the September meeting. His approach was more "dovish" (flexible), highlighting a cooling in the labor market as an argument for modifying monetary policy.
Risks and interpretation of the markets:
Powell described the labor market as a “curious kind of balance,” an unusual situation due to the simultaneous decrease in the supply and demand for workers, which is increasing the downside risks for employment.
He also warned that tariffs are raising prices, although he anticipates that their effects could be temporary.
Market reaction:
Following his intervention, markets reacted positively: a drop in the dollar, a rise in stocks, greater appeal for gold, and heightened expectations of a rate cut in September. The probability rose to around 90% according to traders.
Balance between inflation and employment:
Although inflationary risks persist, the Fed is beginning to give more importance to signs of weakness in employment, which opens room for future adjustments if the data confirms the trend.