During his annual speech in Jackson Hole, Wyoming, on Friday, Federal Reserve Chair Jerome Powell suggested that a potential interest rate reduction might occur at the upcoming Fed meeting in September, despite “sweeping changes” in economic policy.

“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said.

The Fed has held rates between 4.25% and 4.5% since December 2024.

According to EY-Parthenon Senior Economist Lydia Boussour, who communicated to Entrepreneur through email, the Fed’s priority is evolving “from inflation to the labor market.” Powell seized this opportunity to adjust the Fed’s risk balance assessment, previously more focused on inflation during the July FOMC meeting.

^{Federal Reserve Chairman Jerome Powell (R) is seen with Bank of Japan Governor Kazuo Ueda (2nd R), European Central Bank Governor Christine Lagarde (2nd L), and Governor of the Bank of England Andrew Bailey (L) in Grand Teton National Park on August 22, 2025, near Jackson Hole, Wyoming. (Natalie Behring | Getty Images)}

Boussour noted, “Powell also recognized that the possibility exists for tariffs to incite lasting inflation pressures or alter long-term inflation expectations. However, current market and survey data indicate that inflation expectations are steady and align with the Fed’s 2% long-term inflation target.”

When does the Fed meet next?

The next Federal Open Market Committee (FOMC) meeting begins September 16. A policy decision will be released on Wednesday, September 17.

While a September rate cut seems highly probable and aligns with EY-Parthenon’s established perspective, Boussour stated that the Fed is expected to continue a careful, data-focused strategy as tariff-induced price pressures persist within the economy.

Boussour predicted a rate reduction in September, with “another 25bp cut anticipated in December, and potentially an extra 100 basis points of easing likely in 2026 if economic and labor market conditions visibly decline further.”

What would a rate cut mean for consumers?

One rate cut might not make much of a difference, CNBC notes. Mortgage rates remain high, and the markets (not the Fed) move the 10-year Treasury yield, which influences the 30-year fixed-rate mortgage.

Boussour expects more cuts to follow, however, which could lead to improved consumer confidence.

What would a rate cut mean for small businesses?

A federal rate cut likely means small businesses can borrow at lower costs, which can lead to various other growth factors, including increased consumer demand and more hiring, per Bankrate.

Lower borrowing costs mean lower financing rates for business improvements, like updated equipment or software. It also leads to lower monthly payments, which frees up monthly income for other expenses. Lower rates also tend to boost customer spending, Bankrate notes.

It can also make banks more agreeable to approve loans, which can be a boon for businesses in rural areas with smaller, regional banks, and provide more opportunities to refinance existing loans with higher rates.