The Federal Reserve has faced political pressure to cut interest rates and calls for leadership change. Slowing job growth and broader economic headwinds increase the likelihood of policy easing. Changes in trade, immigration, taxes, spending and regulation are affecting both supply and demand and shifting the balance of risks. High borrowing costs, a softening labor market and contained inflation risks could justify easing policy, while tariffs pose a risk of temporary or potentially more persistent upward pressure on prices. Monetary policy is described as modestly restrictive, with limited room to cut before reaching a neutral stance. Any rate cuts are expected to be measured and gradual.
But Powell's focus on slowing job growth and economic headwinds made clear to his audience that a reduction is likely. He offered remarks regarding changes in trade and immigration policies that are affecting both supply and demand, as well as shifts in tax, spending and regulatory policies. The balance of risks appears to be shifting, Powell said, noting that high borrowing costs, a softening labor market and contained inflation risks could justify easing policy.
He pointed to weaker monthly job gains but said it was unclear whether the slowdown reflected weaker hiring demand or fewer available workers due to President Donald Trump's immigration crackdown. The labor market, Powell said, is in a curious kind of balance that merits caution. The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance, Powell said in his remarks, adding that the Fed is monitoring the unemployment rate and the strength of the U.S. job market.
At the same time, Powell acknowledged that inflation remains too high but argued that Trump's tariffs are more likely to cause a temporary price spike than a lasting surge. The reasonable base case is that the effects will be relatively short-lived, he said. It is also possible, however, that the upward pressure on prices from tariffs could spur a more lasting inflation dynamic, and that is a risk to be assessed and managed.
Collection
[
|
...
]