Federal Reserve Chair Jerome Powell on Friday signaled that the door is open to interest rate cuts, while stressing the high level of uncertainty that continues to challenge monetary policymakers.

Speaking at the Fed’s annual symposium in Jackson Hole, Wyoming, the Federal Reserve Chairman highlighted the “sweeping changes” in tax, trade, and immigration policies, saying they are shifting the balance of risks between the Fed’s dual mandate of maximum employment and stable prices.

While Powell acknowledged the labor market remains solid and the economy has shown resilience, he also warned that downside risks are growing. At the same time, he pointed to tariffs as a source of potential inflationary pressure that could trigger stagflation—an outcome the Fed is determined to avoid.

With the policy rate already one percentage point below the level of last year’s Jackson Hole speech and unemployment still low, Powell said current conditions give the Fed room to “proceed carefully as we consider changes to our policy stance.” But he added that “with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”

That was as close as Powell came to endorsing a rate cut, which markets widely expect at the Federal Open Market Committee’s next meeting on Sept. 16–17.

The central bank has held its benchmark borrowing rate in a range of 4.25% to 4.5% since December, citing the uncertain impact of tariffs and inflation risks as reasons for caution. Policymakers believe the current slightly restrictive stance gives them time to weigh further moves.

Without directly addressing Trump’s demands, Powell underscored the Fed’s independence, emphasizing that decisions will be based solely on data and the economic outlook. “FOMC members will make these decisions, based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach,” he said.

The speech came amid ongoing White House trade negotiations that remain fluid and unpredictable. Recent indicators show consumer prices rising gradually, but wholesale costs climbing at a faster pace. From the administration’s perspective, tariffs will not cause lasting inflation, and therefore justify rate cuts. Powell, however, stressed that outcomes are highly uncertain, noting the potential for temporary spikes that could still complicate policy decisions.

“It will continue to take time for tariff increases to work their way through supply chains and distribution networks,” Powell said. “Moreover, tariff rates continue to evolve, potentially prolonging the adjustment process.”

Powell also used the speech to reflect on the Fed’s five-year review of its policy framework. The last major review, in 2020 during the pandemic, led to the adoption of a “flexible average inflation targeting” approach, allowing inflation to temporarily run above 2% to support a more complete labor market recovery.

“The past five years have been a painful reminder of the hardship that high inflation imposes, especially on those least able to meet the higher costs of necessities,” Powell said.

The review reaffirmed the Fed’s 2% inflation target, despite debate over whether the goal is too rigid. Powell argued the target remains critical to anchoring long-term inflation expectations. “We believe that our commitment to this target is a key factor helping keep longer-term inflation expectations well anchored,” he said.