(Reuters) – The president of the American Federal Reserve (Fed), Jerome Powell, spoke on Friday a possible drop in rates at the meeting of the Central Bank of September, but did not make a firm commitment, recognizing the growing risks for the labor market while affirming that the possibility of higher inflation persisted.

“If the labor market seems balanced, it is a curious balance resulting from a marked slowdown in the supply and demand for workers. This unusual situation suggests that the risks of lowering employment increase. And if these risks are materialized, they can do it quickly,” said Jerome Powell during the annual economic symposium of Jackson Hole, in Wyoming.

“The stability of the unemployment rate and other labor market indicators allows us to advance with caution in our reflection on the modifications to be made to our political orientation. Nevertheless, given the restrictive nature of monetary policy, basic perspectives and the evolution of risk balance could justify an adjustment of our political orientation,” said Jerome Powell.

Even if customs duties should lead to an increase in prices, the basic scenario provides that their impact on inflation will fade, he also stressed.

After the speech of the president of the Fed, the American yields drop. Treasuries at ten years loses 7.0 base points at 4.2615% and the two years fell from 9.4 base points to 3.6985%.

The dollar is also in red and abandons 0.69% against a basket of reference currencies.

On the other hand, the American indices increase their earnings, the Dow Jones progressing by 1.48%, the Standard & Poor’s 500 by 1.28%and the composite Nasdaq of 1.49%.

Powell’s comments pave the way for a drop in rates at the Fed meeting on September 16 and 17, but also attach great importance to the reports on employment and inflation that will be published by then.

Unaccompanied

Jerome Powell’s statements have given little indications on the date at which rates could continue to decrease or to the speed of this decline, which should fuel President Donald Trump’s pressures, who claims that there is no risk of inflation and that the Fed should reduce its rates immediately.

Donald Trump put pressure on the Fed by asking for the resignation of Jerome Powell, then, this week, that of the governor of the Fed Lisa Cook.

The president of the Fed received an ovation at the start of his speech, a conclusion of eight years that started and ended with scathing criticism from US President Donald Trump. The latter had promoted him to the presidency during his first mandate, but the American president was quickly disappointed with his refusal to conduct an accommodating monetary policy.

The Trump administration is both looking for a replacement for Jerome Powell and puts pressure on other members of the Governors’ Council to resign, in the hope of appointing a majority of the seven members of this body.

In addition to his point on the economic situation, Powell has published a new strategic framework of the Fed which stresses that its full employment objective will depend on price stability.

“We continue to believe that monetary policy must be prospective and take into account offsets in its effects on the economy and that the Fed must find a balance between the risks linked to its mandates in terms of employment and inflation,” said Jerome Powell.

According to him, setting quantified objectives for elements such as the ideal level of employment is “reckless”.

The FED has maintained its key rate unchanged in the current range of 4.25% to 4.50% since December, while officials are starting to worry about the impact that new administration policies may have on inflation, which remains higher than the 2% target of the central bank and should increase as new customs duties will repercuss on consumer prices.

(Report Howard Schneider; Mara Vîlcu for the , edited by Augustin Turpin and Kate Entringer)

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