Powell hints easing as markets lift on rate-cut odds

Federal Reserve Chair Jerome Powell signaled a possible shift toward easier policy at the Jackson Hole Economic Policy Symposium on Friday, and markets reacted swiftly: stocks surged, bond yields fell and traders sharply raised the odds of a rate cut as soon as the Federal Open Market Committee meeting in September. Powell’s comments stopped short of a promise to reduce rates but opened the door to easing if risks continue to tilt toward slower growth and weaker labor markets.

Speaking at the annual central bank forum, Powell said that with policy in restrictive territory, “the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” He also acknowledged that downside risks to employment were rising. Investors interpreted those remarks as the strongest hint yet that the Fed could lower borrowing costs, sending the Dow Jones Industrial Average up more than 2 percent in immediate trading and the Nasdaq and S&P 500 higher. Bond yields fell as traders re-priced future policy, and some betting markets put the probability of a September cut near 90 percent, up from roughly three quarters before the speech.

The rally came after a mixed week in...