Federal Reserve Chair Jerome Powell stated that the U.S. economy “may be on a somewhat firmer trajectory than expected,” even as the labor market remains in a “low-hiring, low-firing doldrums.” Speaking at a conference, Powell highlighted a key dilemma: strong consumer spending and overall economic activity, which suggest a firmer footing, are in tension with sharply slowed job creation. This contradiction complicates the Fed’s dual mandate of maintaining maximum employment and price stability.

Powell noted that the outlook for employment and inflation has not changed significantly since the Fed’s recent rate cut, despite the temporary absence of official data due to the government shutdown. Inflation, currently above the 2% target, is primarily being driven by tariffs rather than broader economic pressures.

The Fed Chair indicated that the increasing downside risks to employment have shifted the central bank’s focus toward protecting the job market. His remarks solidified market expectations for another quarter-point interest rate cut at the Fed’s upcoming meeting. Powell stressed that the Fed will take a “meeting-by-meeting” approach and that there is “no risk-free path for policy” as they navigate the trade-offs between job security and inflation goals. Furthermore, Powell addressed the Fed’s balance sheet, indicating that the ongoing asset runoff could conclude in the coming months once reserve levels are deemed “ample.”

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Source: https://finance.yahoo.com/news/feds-powell-says-economy-firmer-193859445.html