QUOTES-Fed's Powell opens door to September easing

NEW YORK, Aug 22 (Reuters) - U.S. Federal Reserve Chair Jerome Powell on Friday pointed to a possible rate cut at the central bank's September meeting but stopped short of committing to it in remarks that walked a narrow line acknowledging growing risks to the job market while also saying risks of higher inflation remain.

"While the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers," Powell told an audience of international economists and policymakers at the Fed's annual conference in Jackson Hole, Wyoming.

MARKET REACTION:

STOCKS: U.S. stocks extended gains after Fed's Powell's remarks.

BONDS: U.S. Treasury yields dropped as Fed's Powell alluded to rate cuts.

FOREX: The dollar fell after Powell's comments.

COMMENTS:

TOM GRAFF, CHIEF INVESTMENT OFFICER, FACET, PHOENIX, MARYLAND:

"Powell's Jackson Hole speech was more dovish than many expected. He explicitly said that the 'shifting balance of risks may warrant adjusting our policy stance'."

"Powell wouldn't say something this explicit unless a cut in September was almost assured. It would take a very big surprise in the data to prevent at least one cut."

"This tells us that Powell is quite confident that tariffs will be causing a one-off increase in prices. We saw in the CPI and PCE inflation reports that goods prices have started to rise. Powell is telling us that given the weakness in labor, he's willing to look past that."

"Given Powell's surprisingly dovish comments, it makes sense that both stocks and bonds are up significantly today. However, looking over the next couple months, rate cuts alone won't be enough to sustain strength in stocks. The rate cuts will have to 'work' in the sense that the economy regains momentum. If in fact the economy is stalling and the labor market continues to deteriorate, there are risks to this equity market rally."

DREW MATUS, CHIEF MARKET STRATEGIST, METLIFE INVESTMENT MANAGEMENT, NEW JERSEY"

"The takeaway from Powell's speech was (Christopher) Waller was right. I think he yielded on the inflation side of things. He said there's the possibility that inflation re-accelerates, but that's like the least likely outcome. That's effectively what Waller has been arguing, and acknowledging the rapid deterioration in the labor market, and rightly so, not claiming responsibility for it. They didn't know that's what the labor market looked like, and now the labor market looks really bad, and they have to acknowledge that."

"We have been expecting 25-bps in September. I think that's still the right call. I think that's what will make everyone happy, at least initially. But we do think this is just the first of a few cuts that we can expect over the next six months. By year end, we would expect there to be at least two cuts."

"People have been increasingly worried that we're kind of heading into a stagflationary story with slower growth and still sticky inflation. I think most people are generally confident that inflation is going to stick around for a little bit. And I think it's certainly in line with what Powell is suggesting he's expecting. So, the real question was, are we going to get growth or not? Unfortunately, the answer is, I think we're going to get some growth, but it's not going to feel great."

KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH:

"The committee is open to a lower interest rate environment and we can bake in at least a 25 basis-point rate cut. We'll see what the labor market has to say because it's clear now that the Fed is reacting to the labor market, not the price stabilization part of their mandate. It is a very big shift in what the Fed has been doing."

DAVID SEIF, CHIEF ECONOMIST FOR DEVELOPED MARKETS, NOMURA, NEW YORK:

"This was generally a dovish speech that is consistent Nomura's view that a 25bp cut in September is the base case. We continue to think that a hold is possible with a strong labor market report and/or hot inflation report next month, as is a 50-bp cut if the labor market report next month is once again soft. All three outcomes are plausible, with 25bp the most likely, followed by a hold, and followed by a 50bp cut."

"Powell was dovish in explicitly mentioning a shift in the balance of risk towards a slowdown in the labor market and implying that more easing is coming. In addition, it was dovish in that he did not downplay the soft NFP data from the past three months. He did hawkishly note the low unemployment rate and decline in the ‘breakeven’ rate of job creation, but he did not use it to dismiss the weak NFP data. He also addressed the slowdown in GDP growth, another dovish statement."

HELEN GIVEN, DIRECTOR OF TRADING, MONEX USA, WASHINGTON:

"The dollar short is back in a big way today after both Powell's speech at Jackson Hole and Trump's threats this morning to fire Fed Governor Lisa Cook. The first material move came, naturally, as Powell noted that downside risks to the labor market are weighing more heavily on the Fed's decision-making process - hardly a surprise following July's dismal labor figures."

"The response we're seeing in FX markets is tied pretty directly to substantially increased odds of a 25 basis-point interest rate cut in September as Powell decisively opened the door to that this morning. Traders see a decent chance of a further 25 basis point cut later this year, too, and overnight swaps are placing big bets on substantial easing for the first half of 2026."

"Trump's words on Cook, too, are once again raising concerns over the Fed's independence as it becomes more clear the Administration may be looking to remake the Fed in its own image, so to speak. Should Trump get the rate cuts he wants from Powell & co through the back half of this year, Powell may last through the remainder of his term as Chair, but as of now markets are still unconvinced that any Fed action through this year may be enough for Trump."

IPEK OZKARDESKAYA, SENIOR ANALYST, SWISSQUOTE BANK, SWITZERLAND:

"It's quite interesting because what we see today is that the Fed, or at least Jerome Powell, is tilting towards a more dovish stance in order to prop up the weakening jobs market. So that's actually a dovish shift that we see in the Fed policy that matches the recent market expectations."

"The fact that the Fed is now preparing to give the market that 25 basis point rate cut, at least that they were expecting, is obviously creating a lot of euphoria."

THOMAS HAYES, CHAIRMAN, GREAT HILL CAPITAL LLC, NEW YORK"

"Chair Powell came in more dovish than expected. He has set the table to move in September. The only thing that could derail that would be an excessively strong jobs report in the first week of September, but based on the trends that we're seeing on a weekly basis and the revisions, that is unlikely."

KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO:

"Powell delivered an extraordinarily dovish message here, far more dovish than markets had anticipated. The dollar is plunging, odds on a September rate cut are rising and market participants are clearly bracing for more easing to come."

"What we are seeing here is a clear emphasis on downside risks to labor markets. Powell does give short shrift to inflation risks to some extent. He talks about the possibility for wages and consumer price expectations to become somewhat unanchored. But he's also pointing to the fact that they are at this moment quite well anchored and he talks about the slowdown in consumer demand. I think that's very key because that is typically what central bankers see as an expansion of slack in the economy. In other words, room for inflation to rise or for price increases to avoid triggering big rises in headline inflation."

"The other piece is he says, very importantly, that the labor market appears to be in balance, but it's a curious kind of balance that results from a market slowing in both the supply and demand for workers. And he says we do see downside risks to employment and if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment. So, what he's really saying there is that they are bracing for a pivot in labor market conditions and that the second half of the Fed's mandate has suddenly become much, much more important in terms of defining policy settings."

JAY HATFIELD, CHIEF EXECUTIVE OFFICER, INFRASTRUCTURE CAPITAL MANAGEMENT, NEW YORK:

"Obviously, Powell was more dovish than the market expected, but he is responding to the weakening of the labor market, recognizing the risks there. So it sets us up for a September cut. That's a positive."

"We have already expected a cut, so we're neutral on the market now. Normally we would be negative in the fall, but we're just neutral, which is pretty bullish for this time of the year. We're relieved Powell is not completely clueless."

ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, NEW YORK:

"Chair Powell was able to talk about the balance of risk shifting and therefore the potential of shifting of policy would be appropriate. That's a clear hint that Chair Powell is open to supporting rate cuts in the future, likely in September, again in October and then again in December. So, leaning into the fact that the labor market weakness is clearly the driver as opposed to concern over the core goods price increases that we've seen because of tariffs...The clear message to the market is September is now very live."

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, BROOKFIELD, WISCONSIN: VIA EMAIL

"The Fed isn't going to be the party-pooper. Chair Powell has shown he has an open-mind to reading the data tea leaves. The downside risks to the labor market have risen and while they are still worried about inflation expectations, they aren't going to prioritize the unknowable inflation expectations risk over the known risks to growth."