Wyoming: US Federal Reserve Chair Jerome Powell on Friday (Saturday AEST) endorsed an imminent start to interest rate cuts, saying further cooling in the job market would be unwelcome and expressing confidence that inflation is within reach of the US central bank’s 2 per cent target.

“The time has come for policy to adjust,” Powell said in a highly anticipated speech to the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

Opening a new chapter for the central bank, Powell said his “confidence has grown that inflation is on a sustainable path back to 2 per cent,” after rising to about 7 per cent during the COVID-19 pandemic, and the upside risks have diminished.

Meanwhile, he said, a slowdown in the labor market is “unmistakable” and “the downside risks to employment have increased.”

And while slower hiring, rather than a more concerning rise in layoffs, has so far driven the rapid rise in the unemployment rate to 4.3 per cent, Powell was emphatic that the Fed would not countenance further erosion.

“We do not seek or welcome further cooling in labor market conditions,” Powell said. “We will do everything we can to support a strong labor market as we make further progress toward price stability.”

Analysts and financial markets had already widely expected the Fed to deliver its first rate cut at the September 17-18 policy meeting, a view that was cemented after a readout of the central bank’s July meeting said a “vast majority” of policymakers agreed the policy easing likely would begin next month.

Powell’s new emphasis on protecting the job market shifts the focus to the size of that first rate cut, which may now largely hinge on the September 6 release of the US government’s employment report for August.