JACKSON HOLE, Wyo. (AP) — With the Federal Reserve almost certain to begin cutting its benchmark interest rate next month, Chairman Jerome Powell’s highly anticipated speech at an economic conference Friday morning will be closely watched for clues about how many more rate cuts might be in the pipeline.

Powell is expected to say the Fed has become more confident that inflation is approaching its 2 percent target, more than two years after it hit a painful four-decade high. Still, the Fed chief may take an overall more cautious approach in his remarks at an annual central bankers’ conference in Jackson Hole, Wyoming. Economists note that upcoming economic data, including a monthly jobs report on Sept. 6, will help determine the size of future Fed rate cuts – whether a typical quarter-percentage-point cut or a more aggressive half-percentage-point cut – and how quickly they occur.

“We believe he will try to temper expectations (of a half-percentage point cut) and reiterate that the Fed is data-dependent and does not make decisions in advance,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note.

Powell’s speech comes as the central bank moves toward a long-awaited “soft landing,” in which its rate hikes – 11 of them in 2022 and 2023 – manage to contain inflation without triggering a recession. Inflation was just 2.5 percent in July, according to the Fed’s preferred measure, after peaking at 7.1 percent two years ago.

The progress on inflation has likely prompted many Fed officials to cut interest rates several times this year after rising borrowing costs largely cooled the economy and contained inflation.

Guests approach the Jackson Lake Lodge, site of the Jackson Hole Economic Symposium, in Grand Teton National Park near Moran, Wyoming, on Thursday, August 22, 2024.

Photo: ASSOCIATED PRESS/Amber Baesler

Still, a drop in hiring and a rise in the unemployment rate last month have heightened concerns that the Fed could soon make a mistake in the other direction — by keeping interest rates too high for too long, slowing growth and plunging the economy into recession. Powell is likely to address that balancing act in his speech on Friday.

On Wednesday, minutes from the Fed’s last meeting on July 30-31 showed that the “overwhelming majority” of policymakers said at the time they would likely support a rate cut at the next meeting in mid-September as long as inflation remained low. Several of the 19 Fed officials even supported a rate cut at that meeting, the minutes show.

Also on Wednesday, the Labor Department revised its estimate of job growth for the 12 months through March, saying 818,000 fewer jobs were created this year than previously estimated. The preliminary revisions will be completed in February.

Hiring was still solid during that period, averaging 174,000 per month instead of 242,000, the government said. But because the numbers show that hiring was not as robust as previously thought, a Fed rate cut next month is “a certainty,” Shepherdson wrote.

Economists generally agree that the Fed is getting closer to overcoming the high inflation that left millions of households in distress three years ago as the economy recovered from the pandemic-induced recession. But few economists believe Powell or any other Fed official is ready to declare that mission accomplished.

After the government announced this month that July hiring was much lower than expected and the unemployment rate hit 4.3%, the highest in three years, stocks plunged for two days on fears that the U.S. could slide into recession. Some economists were already speculating that the Fed would cut interest rates by half a percentage point in September and perhaps another cut of the same amount in November.

But more positive economic reports last week, including a further decline in inflation and a sharp rise in retail sales, partially eased those worries. Wall Street traders now expect the Fed to cut its benchmark interest rate by a quarter of a percentage point in September and November and by half a percentage point in December. Mortgage rates have already started to fall in anticipation of rate cuts.

A half-percentage-point Fed rate cut in September would be more likely if there were signs of a further decline in hiring, some policymakers said.

Raphael Bostic, president of the Fed’s Atlanta branch, said in an interview with the Associated Press on Monday that “signs of accelerating weakness in labor markets may justify a faster approach, either in terms of the gradual action or the speed with which we try to return to interest rates” that no longer constrain the economy.

“I am more confident that we will achieve our inflation target,” he said. “And we have seen that labor markets have weakened significantly compared to last year.” “We may need to change our policy stance sooner than I previously thought.” A few months earlier, Bostic had said he would probably only support a rate cut in the last three months of the year.

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