The US economy is losing momentum under Donald Trump, the chairman of the Federal Reserve has warned.

Jerome Powell opened the door to a September interest rate cut as he warned of “an abrupt slowdown” in the job market and lower economic growth.

Speaking at the Jackson Hole Symposium on Friday, Mr Powell said: “The shifting balance of risks may warrant adjusting our policy stance.

“Downside risks to employment are rising and if those risks materialise, they can do so quickly in the form of sharply higher lay-offs and rising unemployment at the same time.”

His comments come as the US economy grapples with Mr Trump’s immigration crackdown and global trade war. The Fed chairman also signalled that the president’s tax-cutting One Big Beautiful Bill Act could also significantly impact the economy.

Mr Powell said: “This year, the economy has faced new challenges. Significantly higher tariffs across our trading partners are remaking the global trading system.

“Tighter immigration policy has led to an abrupt slowdown in labour force growth over the longer run.

“Changes in tax spending and regulatory policies may also have important implications for economic growth and productivity.”

US GDP growth has more than halved this year and official statistics published earlier this month showed a sharp slowdown in job creation.

However, Mr Powell risks provoking Mr Trump’s ire with the suggestion that the economy is weakening on his watch.

The president sacked the head of the Bureau of Labor Statistics earlier this month after the poor jobs numbers were published, claiming the data was “rigged” against him.

Mr Trump has already been exerting intense pressure on Mr Powell and the Fed, claiming the central bank has been too slow to lower interest rates.

The Fed has kept borrowing costs unchanged at 4.5pc at every meeting this year. Mr Trump has called Mr Powell a “numbskull” and “Mr Too Late”, several times threatening to sack him.

Earlier this week, Mr Trump also lashed out at Fed board member Lisa Cook, publicly demanding for her to resign over allegations of mortgage fraud. Ms Cook has claimed she is being “bullied to step down from my position because of some questions raised in a tweet”.

On Friday, Mr Trump said he would sack her if she did not step down.

The benchmark S&P 500 stock index on Wall Street surged by 1.3pc on Friday in the wake of Mr Powell’s comments as traders added to bets that the Fed would cut interest rates in September. Investors now see a 94pc chance of a rate cut next month and are pricing in two cuts before the end of this year.

The blue-chip Dow Jones Industrial Average rose as much as 1.7pc, while the tech-heavy Nasdaq Composite rebounded by as much as 1.9pc following an AI-led sell-off earlier in the week.

Mr Powell’s comments also sent government borrowing costs plummeting around the world.

The yield on 10-year US Treasury bonds – the global benchmark – dropped by seven basis points to 4.26pc. The interest-rate sensitive two-year yield sank by 10 basis points to 3.69pc.

Britain’s borrowing costs also declined, although at a slower pace. The pound rose 0.6pc against the dollar to nearly $1.35.

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