Federal Reserve Chair Jerome Powell sent a straightforward message to markets in a key speech on Friday, saying "the time has come" for the central bank to begin lowering interest rates.

Speaking at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyo., Powell said: "The time has come for policy to adjust."

"The direction of travel is clear," Powell added, "and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks."

Powell's speech comes just over three weeks out from the Fed's Sept. 17-18 meeting, which should see the central bank announce its first interest rate cut since 2020.

Powell acknowledged recent softness in the labor market in his speech and said the Fed does not "seek or welcome further cooling in labor market conditions."

The July jobs report rattled markets earlier this month, revealing that there were just 114,000 jobs added to the economy last month while the unemployment rate rose to 4.3%, the highest since October 2021. Data earlier this week also showed that 818,000 fewer people were employed in the US economy as of March, suggesting reports have been overstating the strength of the job market over the last year.

"It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon," Powell said.

Ahead of Powell's speech, investors had priced in nearly 100% odds the Fed would lower rates next month, with odds on a cut of 0.25% vs. 0.50% standing at roughly two to one.

Read more: Fed predictions for 2024: What experts say about the possibility of a rate cut

"Four and a half years after COVID-19’s arrival, the worst of the pandemic-related economic distortions are fading," Powell said.

"Inflation has declined significantly ... Our objective has been to restore price stability while maintaining a strong labor market, avoiding the sharp increases in unemployment that characterized earlier disinflationary episodes when inflation expectations were less well anchored. While the task is not complete, we have made a good deal of progress toward that outcome."

Powell's remarks on Friday were reminiscent of those he delivered at Jackson Hole in 2022, in which the Fed chair offered a direct assessment of the economic outlook and, at the time, the need for additional rate increases.

"At this podium two years ago, I discussed the possibility that addressing inflation could bring some pain in the form of higher unemployment and slower growth," Powell said.