Fed Chair Powell says hiring slowdown poses economic risks, hinting at more rate cuts ahead
Federal Reserve Chair Jerome Powell Warns of Slowdown in Hiring, Signals Potential Rate Cuts
During a speech before the National Association of Business Economics in Philadelphia, Federal Reserve Chair Jerome Powell highlighted the looming threat of a sharp slowdown in hiring on the U.S. economy. This signals a high probability of the central bank cutting its key interest rate twice more this year.
Powell’s remarks come in the midst of a government shutdown, which has hindered the availability of official economic data. Despite this, Powell stated that the outlook for employment and inflation has remained relatively stable since the Fed’s September meeting, where they made the first rate cut of the year.
At the September meeting, Fed officials projected two more rate cuts in 2025 and one in 2026. Lowering rates could lead to reduced borrowing costs for consumers and businesses, facilitating increased spending and investment in the economy.
Scott Helfstein, head of investment strategy at Global X, noted the importance of maintaining lower rates to support job creation, emphasizing the need for the Fed to continue its rate-cutting strategy.
Future Rate Decisions and Economic Concerns
The Fed’s next rate decision is scheduled for October 29, with another meeting set for December 10 later in the year. Powell reiterated the Fed’s focus on employment, indicating a potential shift in policy to address the growing risks in the job market.
Furthermore, Powell suggested that the Fed may halt the reduction of its balance sheet, which could impact longer-term Treasury interest rates. He defended the Fed’s previous actions of purchasing Treasury bonds and mortgage-backed securities during the pandemic to support the economy.
Criticism and Controversy
However, these purchases have faced criticism from Treasury Secretary Scott Bessent and other critics, who argue that the Fed’s actions exacerbated inequality and failed to provide significant economic benefits. Some have also questioned the timing of the Fed’s decision to end asset purchases and raise interest rates to combat inflation.
Powell acknowledged the challenges faced by the Fed in navigating economic uncertainties, emphasizing the need for proactive measures to mitigate downside risks. He defended the Fed’s asset purchases as a necessary step to prevent market disruptions and stabilize interest rates.
