Topline<\/p>\n
Federal Reserve Chair Jerome Powell on Tuesday said a weakening labor market in the U.S. has outweighed concerns about growing inflation, prompting the central bank to lower interest rates last week for the first time in months amid pressure from President Donald Trump. <\/p>\n
A recent decision by the central bank leaves the U.S. \u201cwell-positioned\u201d to respond to economic developments, Powell said.<\/p>\n
Copyright 2025 The Associated Press. All rights reserved.Key Facts<\/p>\n
Powell, during an address Tuesday in Providence, Rhode Island, said \u201cnear-term risks\u201d to inflation are \u201ctilted to the upside,\u201d while employment risks are increasing and have shifted the Federal Reserve\u2019s approach to monetary policy, despite presenting a \u201cchallenging situation.\u201d <\/p>\n
The Fed\u2019s policymaking panel voted<\/a> 11-1 last week to lower interest rates, which were held between 4.25% and 4.5% since December, by a quarter-point to a new range between 4% and 4.25%.<\/p>\n The U.S. labor market is experiencing a \u201cmarked slowdown\u201d in supply and demand, Powell said, though he noted \u201cuncertainty around the path of inflation remains high.\u201d<\/p>\n Powell also noted he believed the latest interest rate easement leaves the U.S. \u201cwell-positioned\u201d to respond to economic developments.<\/p>\n Fed Governor Michelle Bowman said earlier Tuesday she was \u201cconcerned\u201d the labor market could enter a \u201cprecarious phase,\u201d suggesting a \u201cshock could tip it into a sudden and significant deterioration.\u201d<\/p>\n Bowman said she believed recent cuts to interest rates are the \u201cfirst step\u201d to return to neutral levels, though Powell did not signal whether the central bank would favor additional cuts at its upcoming meeting in October.<\/p>\n What To Watch For<\/p>\n Powell\u2019s comments precede personal consumption expenditures (PCE) price index data, the Fed\u2019s preferred inflation measurement, from the Bureau of Economic Analysis on Friday. Wall Street anticipates annual inflation to hit 3% in August, a 0.1% uptick from July, while headline PCE inflation is expected to jump to 2.8% from 2.6%, according to FactSet.<\/p>\n Will The Fed Cut Interest Rates Again?<\/p>\n Investors are trading at 91.9% odds the Fed\u2019s policymaking board will lower rates by at least a quarter-point to between 3.75% and 4% on Oct. 29, according<\/a> to CME\u2019s FedWatch. Fed Governor Stephen Miran, Trump\u2019s latest appointee to the central bank and the lone vote against the Fed\u2019s decision for a quarter-point cut last week, has argued in favor of a half-point reduction to rates. Miran, in comments<\/a> to the Economic Club of New York on Monday, suggested interest rates could be cut by nearly 2%. <\/p>\n Key Background<\/p>\n Powell and the Federal Open Market Committee have faced criticism from Trump during his second presidency, as Trump has claimed the central bank should cut rates \u201cBIGGER THAN [they] HAD IN MIND.\u201d The Fed has planned for up to two 25-basis-point reductions to interest rates by the end of the year, lowering the range down to between 3.75% and 4%, while adhering to a dual mandate of full employment and stabilized inflation of around 2%. Unemployment rose more than expected to 4.3% in August, with far fewer jobs added than expected, while the Bureau of Labor Statistics noted the labor market added nearly 1 million fewer jobs in the 12 months ending in March. Trump ousted the agency\u2019s chief earlier this year over claims of data manipulation ahead of the 2024 presidential election, and Commerce Secretary Howard Lutnick has said<\/a> that under new leadership, the agency\u2019s data will \u201cget better.\u201d<\/p>\n