Washington – the heads of the U.S. Federal Reserve System face a double challenge: rising inflation risks and a slower labor market recovery. Fed Chair Jerome Powell called the current situation “difficult” for making the regulator’s decision and demands a cautious approach to monetary policy.
At the moment, rates remain in a moderate range, and according to Powell, there is no obvious need to cut them sharply and quickly unless the economy delivers new surprises.
The risks to employment have risen, altering the balance of risks to achieving our goals. This policy, which I see as moderately restrictive, leaves us well prepared to respond to potential economic changes.
– Jerome Powell
The prevailing uncertainty about the inflation trajectory remains high, and the leadership must ensure that a one-off price increase does not become a persistent inflation problem.
The uncertainty about the inflation trajectory remains high,
– Jerome Powell
Another aspect is that we cannot leave the target unattended, so we approach rate cuts cautiously.
– Jerome Powell
In the context of discussions about further rate cuts, there is a divergence of opinions: some regulator members call for aggressive action to support the labor market, while others insist on caution not to over-stimulate the economy too quickly.
Investors expect two more cuts by year-end, which could push the federal funds rate to a new multi-year low. However, the forecast depends on how inflation risks unfold.
Risks on both sides mean there is no risk-free path.
– Jeremy Goolsby, president of the Chicago Philosophical Bank
In public remarks, members of the Federal Reserve Board of Governors emphasize risks in the labor market. Some officials appointed by the presidential administration point to a weaker labor market and a minimal impact of tariffs on inflation going forward.
The latest data reveal a considerably more fragile labor market,
– Michelle Bowman
Changes in the labor market and rising inflation in recent months, according to analysts, may keep pressure on the Fed’s monetary policy in the near term. Nevertheless, many experts advise staying cautious in future moves to avoid overheating the economy or slowing the pace of the recovery.
I see policy as very restrictive, and that carries substantial risks for the Fed’s employment mandate,
– Stephen Mirin, Fed adviser
In summary, experts emphasize: the main thing is a measured use of the Fed’s tools to stabilize prices and support a healthy labor market, without letting the economy overheat. The regulator should continue closely monitoring inflation and employment dynamics and respond flexibly to any changes in the economy.