LONDON: Stocks rose and US Treasury yields and the dollar fell on Friday after Federal Reserve chair Jerome Powell pointed to a possible rate cut at the central bank’s September meeting.
Powell stopped short of committing to cutting interest rates as he tried to walk a narrow line acknowledging growing risks to the job market while also saying risks of higher inflation remain.
His remarks, to the annual central banking symposium at Jackson Hole, are his final address as chair of the Fed.
Share markets rallied in response to Powell’s speech, and the S&P 500 and Nasdaq Composite rose 1.4 percent and 1.6 percent respectively. The Dow Jones Industrial Average rose 1.6 percent to a record intraday high.
Government bonds also welcomed the news with the rate-sensitive two-year Treasury yield down nearly 10 basis points at 3.69 percent. Benchmark 10-year yields fell 6 bps to 4.27 percent.
Powell’s past speeches at the event have often moved markets, and this year’s remarks are under particularly close scrutiny as his position has come under heavy criticism from US President Donald Trump, sparking concerns about potential threats to the Fed’s independence.
His comments open the door to a rate cut at the Fed’s Sept. 16-17 meeting, and while he put heavy weight on jobs and inflation reports that will be received before then, analysts said Powell appeared to be putting greater weight on the former.
“Chair Powell was able to talk about the balance of risk shifting and therefore the potential of shifting of policy would be appropriate,” said Art Hogan, chief market strategist, B. Riley Wealth.
“That’s a clear hint that Chair Powell is open to supporting rate cuts in the future.”
But he offered little guidance about how soon or how quickly rates might continue to move lower, likely stoking further pressure from Trump, who contends there is no risk of inflation and that the Fed should slash rates immediately.
European markets echoed the moves by their US peers, but in a more muted manner.
Europe’s broad STOXX 600 index was last up 0.6 percent, while Germany’s 10-year yield, the euro zone benchmark, was down 3 bps at 2.72 percent.
The comparatively larger fall in US yields weighed on the dollar, which was down 0.7 percent on the Japanese yen at 147.3 yen.
The euro rose 0.64 percent to $1.1683.
China tech
Earlier in the day, the focus was on Chinese shares and the CSI 300 Index gained 2.1 percent, after DeepSeek released an upgrade to its flagship V3 AI model and Reuters reported that Nvidia had asked Foxconn to suspend work on the H20 AI chip, lending support to Chinese rivals.
Tech stocks listed in Hong Kong rose 2.7 percent.
Also in Asia, Japanese data showed core consumer prices slowed for a second straight month in July but stayed above the central bank’s 2 percent target, keeping alive expectations for a rate hike in the coming months.
