At the Jackson Hole conference, Federal Reserve Chair Jerome Powell addressed several structural shifts reshaping the U.S. economy. He noted that recent tariff increases are already pushing up prices in some goods categories: core goods inflation has risen 1.1% year-over-year after months of decline through 2024.
Powell pointed to tighter immigration policies as a major factor slowing labor force expansion. Recent payroll gains have weakened, averaging roughly 35,000 jobs per month over the past three months. That softer employment momentum has coincided with slower overall economic growth: real GDP expanded at an annualized rate of 1.2% in the first half of 2025, about half the pace seen in 2024. Powell emphasized that these trends reflect structural changes rather than short-term swings, and therefore are not problems that monetary policy alone can easily resolve.
In response to the evolving outlook, the Fed announced an updated five-year policy framework. The revised statement returns to a flexible inflation-targeting approach and removes prior language referencing the lower bound constraint. Powell said this framework better equips the central bank to balance its dual mandate amid an uncertain environment.
On tariffs, Powell suggested the current price impact may be largely a one-time level shift instead of the start of a persistent inflation spiral. Still, he made clear the Fed will act if tariff-driven price gains threaten to become sustained. With policy rates roughly 100 basis points closer to a neutral stance than a year ago, Powell said the Fed will “proceed carefully,” basing decisions on incoming data and evolving economic conditions.