Wall Street stocks rose after US Federal Reserve (Fed) Chairman Jerome Powell left the door open for interest rate cuts. This also led to a decline in the dollar against the euro and other major currencies, AFP reported.

Investors eagerly awaited Powell's speech throughout the week, hoping to hear hints that the Fed would cut interest rates at its next meeting in September to stimulate economic growth.

The three major indices in New York rose after his statement, recovering from this week's sell-off of technology stocks.

European stock markets also rose in afternoon trading, although gains were limited by the impact of President Donald Trump's tariffs on the German economy, which contracted in the second quarter.

In his speech at the annual symposium of global central bankers in Jackson Hole, Wyoming, Powell warned that the risks of higher inflation and a weakening labor market meant a "challenging situation."

"The risks to employment are increasing," Powell said, adding that the effects of Trump's tariffs on consumer prices "are already clearly visible."

"With policy in restrictive territory, the underlying outlook and the changing balance of risks may warrant a policy adjustment," the Fed chairman emphasized.

He is under intense public pressure from the US president to lower interest rates.

But the independent central bank has kept key interest rates stable in the range of 4.25% to 4.50% since their last cut in December.

In keeping interest rates unchanged, policymakers pointed to the resilience of the labor market while monitoring the effects of Trump's sweeping tariffs on the world's largest economy.

"The market was pricing in a roughly 75% chance of a rate cut in September," said Brett Kenwell, investment analyst at eToro.

But according to the CME Group's FedWatch tool, the probability exceeded 80% at the end of Friday (August 22).

Kenwell noted, however, that "rising inflation is still a risk and could prevent the Federal Reserve from acting as quickly as it would like, but it is unlikely that the committee will remain inactive if we see a further weakening of the labor market." 

The dollar fell against currencies such as the euro, the pound, and the yen, as lower yields make the greenback less attractive to foreign investors.

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