#PowellWatch The chairman of the Federal Reserve, Jerome Powell, carefully opened the door to an interest rate cut in September, pointing to the growing risks to the labor market, even as concerns about inflation persist.

"The stability of the unemployment rate and other labor market measures allows us to proceed cautiously as we consider changes to our policy stance," Powell said in prepared remarks for the Fed's annual conference in Jackson Hole, Wyoming, on Friday. Powell's anticipated statements seemed to align with investors' expectations, who bet that the Fed will implement its first interest rate cut of the year at the Federal Open Market Committee meeting on September 16-17. Before Powell's speech, investors placed the odds of a cut next month at around 75%, according to federal funds futures contracts.

Powell stated that the labor market is in a "curious state of equilibrium," resulting from a marked slowdown in both the supply and demand for workers. He cited July's employment data, which showed that job growth in recent months was substantially weaker than previously reported. This unusual situation suggests that downside risks for employment are increasing," he said. "If those risks materialize, they could do so quickly in the form of far higher layoffs and rising unemployment."

But he continued to argue that policymakers must guard against the prospect that President Donald Trump's tariffs lead to persistent inflation. He said that the effects of tariffs on consumer prices are "now clearly visible," but it is reasonable to expect that the effects will be relatively short-lived.