Jerome Powell: Time has come for interest rate cut, says Fed boss

“The time has come for policy to adjust,” Mr Powell said, speaking from a conference in Jackson Hole, Wyoming, while adding that the timing and pace of cuts would depend on data.

The remarks signalled the start of a new fight for the Fed, after more than two years focused on stabilising prices.

The Fed has kept its key lending rate at roughly 5.3% since last July, holding off on cuts pursued by central banks in other countries, including the UK.

Mr Powell has argued the US economy was healthy enough to handle the high interest rates, pointing to a steady streak of job gains, which has helped households weather the jump in prices and uptick in borrowing costs.

But those gains have slowed significantly since last year, reviving fears that the Fed’s policies will knock the expansion off course and throw millions of people out of work.

The US has experienced recession after most of the Fed’s previous rate-rising campaigns.

In his speech, Mr Powell acknowledged a significant slowdown in the job market, saying the Fed did not “seek or welcome further cooling”.

But he pushed back against concerns about another recession in the near future, arguing that the rise in unemployment was consistent with a slowdown in hiring, not a sudden spike in job cuts.

“There is good reason to think that the economy will get back to 2% inflation while maintaining a strong labour market,” he said, adding later that the “pandemic economy” had proven to be “unlike any other”.

Analysts said the speech would raise confidence that the bank would cut rates by at least 0.25 percentage points at its meeting next month as is currently expected – or perhaps by more.

“The lack of any guidance suggests that Powell is keeping his options open,” said Stephen Brown, deputy chief North American economist at Capital Economics, after the speech.