United States Federal Reserve chair Jerome Powell says the central bank may be ready to resume cutting interest rates soon since the balance of the risks to the American economy are shifting.

“In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside — a challenging situation,” he said during his annual speech at the Jackson Hole Economic Symposium in Wyoming. “Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”

Over the past year, the Fed has remained focused on how U.S. trade policy may impact consumer prices and long-term inflation. Powell said the effects of

tariffs “are clearly visible” on consumer prices, but the baseline case is that this impact will be a one-time thing, although risks remain.

“It’s also possible, however, that the upward pressure on prices from tariffs could spur a more lasting inflation dynamic and that is a risk to be assessed and managed,” he said.

Powell said workers could demand higher wages from employers in the wake of higher prices and seeing their real incomes fall, which could set off “adverse wage dynamics,” but said this outcome is unlikely given that the labour market is not tight and downside risks to employment are rising.

The other risk is that longer-term inflation expectations could push actual inflation up, but he said those expectations “appear to be well anchored” for now.

Powell said the Fed has a challenging dual mandate in trying to foster maximum employment while also maintaining price stability.

“When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate,” he said.

The U.S. economy in July added just 73,000 jobs as tariffs and slower immigration took their toll. Powell said job gains over the past three months have averaged 35,000 a month. Meanwhile, U.S. inflation rose by 2.7 per cent in July, above the Fed’s target of two per cent, with core prices rising 3.1 per cent during the same month.

“Inflation had moved much closer to our objective, and the labour market had cooled from its formerly overheated state,” Powell said. “Upside risks to inflation had diminished, but the unemployment rate had increased by almost a full percentage point, a development that historically has not occurred outside of recessions.”

The Fed policy rate for now remains in restrictive territory, a point of contention between the central banker and U.S. President Donald Trump, who would like to see rates fall.

Last month, reports surfaced that Trump was looking to fire Powell, using a costly US$2.5-billion renovation on the Fed headquarters as a pretext. Powell’s term as chair of the Fed comes to an end next year.

Powell said the Fed will continue to make monetary policy decisions on the basis of incoming data and will not allow an ongoing inflation problem to occur “come what may.”

Markets have priced in a Fed cut for its next rate decision on Sept. 17.

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“(Powell) tipped his hat towards a Sept. 17 rate cut, but reading between the lines, one can easily draw the conclusion from his tone that a sequence of cuts is coming our way,” David Rosenberg, an economist and president of Rosenberg Research & Associates Inc., said in a note, adding that Powell was “clearly more dovish than the markets had been expecting as we headed into this morning’s Jackson Hole speech.”