U.S. Federal Reserve Chair Jerome Powell said on Tuesday that the central bank must walk a careful line between controlling inflation and protecting the labor market, as the balance of risks shifts and downside threats to employment grow.

Powell observed that “near-term risks to inflation are tilted to the upside and risks to employment to the downside,” characterizing the current environment as especially delicate. He emphasized that the Fed is not on a preset path, but instead will allow evolving economic data to guide its future rate decisions.

At present, interest rates are between 4.00% and 4.25%, levels Powell believes are still restrictive enough to counter inflation, yet leave some room for flexibility. He warned that overly aggressive easing could reopen inflation risks, while delaying cuts too long might imperil job stability.

Powell’s remarks come amid diverging views within the Fed. Vice Chair Michelle Bowman urged a more decisive easing to protect the labor market, noting signs of weakening hiring. In contrast, several regional Fed presidents called for caution, citing inflation that remains nearly a full percentage point above target.

As the central bank’s next meeting in October approaches, markets are bracing for a possible quarter-point rate cut. However, Powell’s focus on data dependency suggests that any move will depend on how inflation, employment, and broader economic indicators evolve in the interim.

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Source: https://www.reuters.com/world/us/fed-chair-powell-downside-risks-employment-shifted-balance-risks-prompting-last-2025-09-23/