It is the strongest indication that Powell has given of a future rate cut in recent times, according to the news agency AP.
Powell has been heavily pressured by President Donald Trump, who has repeatedly attacked the Fed in harsh terms for not cutting the rate. The Fed chief has resisted and has maintained the importance of the central bank's independence in its decision-making.
The American market reactions to Powell's speech are positive. All three major stock indexes on the New York Stock Exchange are rising sharply. The Stockholm Stock Exchange is also climbing.
Warns of unemployment
Powell says at the same time that the effect of import tariffs on consumer prices is "now clear" and describes the uncertainty in the coming months as high, with a "shifting risk balance".
He also warns of increased unemployment and says that the labor market is in a "special situation" where both the supply and demand for labor have decreased.
At its meeting on July 30, the Fed decided to keep the rate in the range of 4.25-4.50 percent.
Rate cut likely
Prior to the speech, the market had priced in that the rate with a 75 percent probability would be cut by a quarter of a percentage point at the Fed meeting on September 17-18. After the speech, it had risen to 91 percent, reports CNBC.
The interest rate level is a heavy factor for the activity level on the market, partly because it becomes a price tag for taking risk.
Powell has been the head of the Federal Reserve (Fed) since 2018, and was nominated for the post by Trump during his first term in the White House, but his mandate expires in the spring. At the end of his speech, Powell expressed gratitude for being able to participate in the annual meetings in Jackson Hole.
