Fed Chair Powell Signals More Rate Cuts to Support Job Market Amid Inflation Concerns

Jerome Powell, Chair of the U.S. Federal Reserve, indicated that the central bank is likely to implement further interest rate cuts later this year to support the labour market. Speaking on Tuesday, Powell acknowledged that inflation has reaccelerated but emphasised that employment risks have grown, prompting the Fed to prioritise job growth.

Powell Signals More Rate Cuts to Boost Jobs

While the U.S. economy is showing signs of strength, Powell noted that economic activity is on a “somewhat firmer trajectory than expected.” Despite this, he stressed that the downside risks to employment have increased, signalling that monetary policy may need to remain accommodative to maintain robust job creation.

Government Shutdown Complicates Data Collection

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The Federal Reserve faces an additional challenge as a partial government shutdown has delayed key economic data releases. Powell explained that data collection for official reports will resume only once lawmakers agree on funding. In the meantime, the central bank is relying on alternative sources to guide policy decisions.

“Important data are missing, but we routinely review a wide variety of public- and private-sector information that remains available,” Powell said. He highlighted that the Fed also gathers insights from a nationwide network of contacts who provide valuable real-time information on economic conditions. These sources help the central bank navigate policy decisions despite the absence of some official data.

Balancing Inflation and Employment Goals

Powell also reiterated the ongoing challenge facing the Fed: balancing the dual objectives of managing inflation while sustaining employment growth. He acknowledged the “tension between our employment and inflation goals,” underlining that there is no risk-free path for policy in the current economic environment.

In order to maintain the employment market's resilience while keeping an eye on inflationary pressures, the Fed has adopted a cautious approach. According to analysts, the central bank might progressively lower borrowing costs to promote employment growth without jeopardising price stability if the economy permits it.

Conclusion

Jerome Powell's comments indicate that the Fed is still keeping a close eye on the two problems facing the U.S. economy: inflation and joblessness. The Fed hopes to make well-informed policy decisions during the government shutdown by using other data sources, maintaining the labour market as a top priority while closely monitoring inflationary concerns.