Powell says Fed may need to cut rates, will proceed carefully

• Federal Reserve Chair Jerome Powell on Friday signalled a possible interest rate cut at the U.S. central bank's meeting next month, saying that risks to the job market were rising but also noting inflation remained a threat and that a decision wasn't set in stone.
• While his comments were not as explicit as those previewing rate cuts following last year's Jackson Hole conference, investors quickly bumped up bets that the Fed will reduce its policy rate by a quarter of a percentage point at its September 16-17 meeting.
• Several Wall Street analysts alerted clients they were tearing up prior forecasts for the Fed to wait until December to cut rates and now expected reductions totalling half a percentage point by the end of the year, from the current 4.25%-4.50% range.
• Powell's comments put heavy weight on the next monthly employment report, due September 5, and inflation reports due the following week. The most recent job-market report showed monthly payroll gains had plummeted to a monthly average of 35,000 in the July to May period, though the unemployment rate was still a still-low 4.2%.

(Sources: Reuters)