Powell said there are increased downside risks to employment. How will this affect the rate?

U.S. Federal Reserve Chairman Jerome Powell warned of signs of a weakening labor market, saying that downside risks to employment are increasing. His comments may mean that the regulator is ready to cut the rate again at the meeting on October 28-29 - for the second time this fall - as it tries to keep the economy from overheating and maintain a balance between inflation and employment.

Jerome Powell told a meeting of the National Association for Business Economics in Philadelphia that the risks of a decline in U.S. employment have increased.

"While the unemployment rate remained low through August, the pace of job growth has slowed sharply, likely in part because of a decline in labor inflows amid lower immigration and labor force participation," Powell said. - In a less dynamic and somewhat weaker labor market, downside risks to employment appear to have increased."

Pressure on the US labor market continues to build, according to the Fed chief. "Although official employment data for September are delayed [due to the shutdown], the available data show that both layoffs and hiring remain low, and households' perceptions of job availability and companies' perceptions of hiring difficulties continue to decline," emphasized Powell, who was quoted by Yahoo Finance.

Risks of a weakening labor market are causing most Fed members to favor further interest rate cuts, Barron's noted. This means that at the next meeting of the Fed on October 28-29 another reduction may follow, Yahoo Finance admitted.

The Fed chief said in a speech Tuesday that monetary policy decisions will be made "from meeting to meeting" as the Fed seeks to strike a balance between reducing inflation and maintaining employment. "There is no risk-free path," Powell said, adding that the focus of Fed policy is now shifting to supporting the labor market. Inflation and employment forecasts have been broadly unchanged since the Fed's September meeting, the Fed chairman said. August data showed price growth of 2.9% - above the 2% target - but Powell said the increase was mainly due to duties rather than broader inflationary factors.

The U.S. Bureau of Labor Statistics is set to release the official Consumer Price Index (CPI) on October 24 - despite the government shutdown. This data is required by law to recalculate social security payments before November 1.

Powell's speech was the first major public statement since the Fed's September meeting, at which the regulator for the first time this year cut the rate by a quarter point - to a range of 4-4.25%. At the same time, officials were almost equally divided on the future course of policy.

The vast majority of investors - more than 95% - expect a rate cut totaling another 50 bps at the Fed's remaining two upcoming meetings this year, according to CME's FedWatch tool.

This article was AI-translated and verified by a human editor