US Federal Reserve Chair Jerome Powell left the door open to interest rate cuts in a keenly watched speech on Friday, balancing risks to the economy as US President Donald Trump intensifies pressure on the central bank.

Last year, the Fed chair used his keynote speech at the Jackson Hole Economic Policy Symposium to indicate the time had come for interest rate cuts. This time, however, the picture is murkier.

Powell faces constant attacks from Trump -- who is aggressively pushing the independent bank to slash rates -- alongside mixed economic data leading him towards a cautious approach.

Powell warned on Friday that the risks of higher inflation and a weakening jobs market add up to a "challenging situation."

"Downside risks to employment are rising," Powell said in his speech, warning that these challenges could materialise quickly in the form of layoffs.

"While the labour market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers," he noted.

He added that "the effects of tariffs on consumer prices are now clearly visible" and expected to accumulate over the coming months.

He said there is high uncertainty about the timing and extent of the tariffs' impact.

But he vowed: "We will not allow a one-time increase in the price level to become an ongoing inflation problem."

Confronted with these dual challenges, Powell alluded to a possible rate cut: "With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance."

Asked about Powell's remarks on Friday, Trump told reporters: "We call him 'Too Late' for a reason." The president said Powell should have cut rates a year ago.

This marked Powell's final Jackson Hole speech at the helm of the Fed, with his term as chair ending in May 2026. (AFP)