Powell says slowing labor market prompted rate cut, sees ‘challenging situation’ ahead
US Federal Reserve President Jerome Powell speaks at a press conference on September 17, 2025 after the publication of the Interest Rate Policy Declaration of the Washington, DC, Federal Open Market Committee.
Elizabeth Fondz | Reuters
Federal Reserve President Jerome Powell said on Tuesday that the weakness in the labor market outweighs the worries about stubborn inflation and led to a decision to reduce the basic interest rate of the Central Bank last week.
The first segment of the Federal Open Market Committee pointed out that both the supply and demand of the workers and the demand of the tariffs increased inflation further.
At this time, Powell, RI, in his speech to business leaders in Providence, said the Fed’s job was “to balance both sides of our bilateral task” for stable prices and low unemployment.
“Short -term risks for inflation are leaning on the contrary and is a challenging situation, which is a negative situation.” He said. “Bilateral risks mean that there is no risk -free way.”
Powell’s conditions described in the speech are consistent with stagflation with slow growth and high inflation. Although the current situation was much less severe than the US encountered in the 1970s and early 80s, it still offered a policy difficulty for the FED.
However, Powell said that the Central Bank was comfortable on the current policy of the Central Bank, although FOMC has seen the need to be more appropriate if it sees the need to be more appropriate.
“The increasing disadvantage for employment has changed the risk balance to achieve our goals.” He said. “This policy stance, which I still see as a modest restrictive, is good to respond to potential economic developments.”
The stocks reacted very little to Powell’s comments, but the Treasury’s yield is lower.
Watching jobs, inflation
Powell in the labor market, supply and demand “a significant slowdown” recorded. “This is less dynamic and slightly softer in the labor market, negative risks for employment has increased,” he said.
Indeed, payroll growth has slowed down significantly, In the summer, an average of 30,000, comparison revisions showed about one million less work in 12 months before March 2025.
At the same time, inflation has been significantly cooled since it reached more than 40 years in 2022, but still over 2% target of the Fed. Trade department data is expected to show that data to be released on Friday increased by 2.7% on all annual elements and 2.9% excluding food and energy.
In addition to the uncertainty, the effect of President Donald Trump’s tariffs. The President continues to negotiate with the final level of the US trade partners at the final level for the US duties, and is an important deadline for China in early November. Fed economists now see tariffs as a temporary increase in prices, but this may change.
“The uncertainty around the inflation path remains high.” He said. “We will carefully evaluate and manage the risk of higher and more permanent inflation. This one -time increase in prices will not become an ongoing inflation problem.”
Powell is challenging a Fed, which has been intensely criticized by the White House and has an unusual distribution in the views between the authorities. The FOMC meeting, which resulted in the participants, divided 10-9 narrowly about whether the deduction of one or two quarters this year would be appropriate. Stephen Miran, who was appointed as Trump, printed for a much more aggressive course, but his term as governor ended in January.
Early on Tuesday, Governor Michelle Bowman warned the dangers of moving very slowly to address the labor market. “We are at risk of worsening the labor market conditions.” He said.
“I am concerned that the labor market may enter a precarious stage, and there is a risk of a shock of a sudden and significant deterioration.” He said.
Although Powell did not provide expectations for future ratio movements, Bowman said he hoped that the last action would be a “first step” in a move that returns to a neutral interest level.
