Dollar dips, Wall St climbs on Powell’s September rate cut hint

NEW YORK: Wall Street surged on Friday after Federal Reserve Chair Jerome Powell signalled that the central bank could lower interest rates as early as September, a shift that also sent the dollar tumbling against major currencies.

Speaking at the Fed’s annual symposium in Jackson Hole, Wyoming, Powell said the central bank’s new operating framework would return to a “more traditional footing” focused on price stability and flexible inflation targeting, moving away from the emergency-era strategy adopted during the pandemic.

He noted that while inflation has largely receded from its 2021 peaks, risks to employment are rising. “If those risks materialise, they can do so quickly,” Powell warned, in remarks that traders interpreted as dovish.

Speech by Chair Powell on the economic outlook and framework review at an economic policy symposium sponsored by @KansasCityFed: https://t.co/rmcHrQFSvf

Watch live: https://t.co/xOEbfu9h6K

Learn more about Chair Powell: https://t.co/3kYVCuudso pic.twitter.com/1S4QrbydO4

— Federal Reserve (@federalreserve) August 22, 2025

The prospect of monetary easing sent US stocks sharply higher. The Dow Jones Industrial Average jumped 902 points, or 2.02 per cent, to a record 45,688. The S&P 500 rose 1.63pc, its biggest one-day gain since May, while the Nasdaq Composite climbed nearly 2pc.

Rate-sensitive small-cap shares rallied even more strongly, with the Russell 2000 index up 3.9pc.

Ten of the 11 S&P sectors advanced, led by consumer discretionary and industrials. Semiconductor stocks and megacap tech firms also gained, with Tesla up almost 5pc.

Dollar dips after Powell’s speech today

The dollar, meanwhile, fell broadly. The dollar index slid nearly 0.9pc to 97.7, while the euro gained almost 1pc and the yen strengthened 1.1pc.

Traders in futures markets raised the probability of a rate cut at the Fed’s Sept 16-17 policy meeting to nearly 90pc, up from about 72pc earlier in the day, according to the CME FedWatch tool.

Powell emphasised that monetary policy would remain data-driven, pointing to upcoming jobs and inflation figures as decisive.

But he ruled out the “makeup” strategy of the Fed’s 2020 framework, which allowed inflation to overshoot its 2pc target.

Analysts said the Powell’s speech today reflected a reversion to the Fed’s pre-pandemic stance. “Powell gave a clear, concise speech with a strong dovish tone at Jackson Hole,” said Jack McIntyre, portfolio manager at Brandywine Global.

“The message was that the Fed is going to cut policy rates at the September FOMC meeting… what we don’t know is whether it will be a hawkish rate cut where the Fed takes a patient path of lowering rates.”

Gold loses Rs1,500 per tola in local market

The market rally capped a volatile week for US equities, which had been under pressure from technology stock selloffs and concerns about tariffs.