Fed Chair Powell Signals More Rate Cuts Ahead as Labor Market Weakness Outpaces Tariff Pressure
Federal Reserve Chair
Jerome Powell emphasized on October 14 that the Fed is likely to pursue additional rate cuts this year, stating that risks in the
labor market outweigh tariff-driven inflation pressures. Speaking at a conference amid a delayed jobs report, Powell added that despite recent inflation upticks tied to trade taxes, the central bank remains focused on cushioning employment weakness.
Powell’s remarks arrive against a backdrop of mounting concern about a cooling labor force. He noted that slower hiring and soft job gains pose a more severe threat to the economy than inflation from tariffs an admission that the Fed’s next moves may lean dovish. He also flagged the ongoing U.S. government shutdown for disrupting official data flow, forcing Fed officials to rely more on private indicators.
Why This Stance Matters
Rebalancing priorities
Powell’s comments signal a shift: while inflation remains a concern, the Fed is increasingly prioritizing labor market deterioration. He suggested that further easing is on the table if employment trends weaken substantially.
Expectations of upcoming cuts
Markets are now pricing in a high probability of another rate cut at the Fed’s upcoming meeting. Analysts noted that Powell’s tone appears dovish, keeping the door open for easing in October and December.
Tariffs as temporary inflation drivers
Powell acknowledged that tariffs have elevated the Fed’s preferred inflation gauge especially in goods but argued the pressures may be transitory. He stressed that inflation from trade measures is a narrower, concentrated force, not broad inflation.
Policy balancing act
Powell reiterated the Fed’s delicate task: cut too fast and risk fueling inflation; move too slowly and risk entrenching labor weakness. He called it “a delicate balance” between the dual mandate of stable prices and full employment.
Consensus among Fed officials
Other Fed leaders have echoed Powell’s view. In recent days, Bowman suggested two cuts might still be expected this year. Boston Fed President Collins emphasized the need to support a cooling job market. Meanwhile, NY Fed President Williams also backed further cuts citing labor risks.
Risks and Caveats
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Inflation persistence: If inflation proves stickier than expected, the Fed might be forced to pause cuts or even raise again.
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Data blackout: The shutdown has delayed key reports like the September jobs data, complicating decision-making.
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Tariff uncertainty: New or unexpected trade policies could reignite inflation pressures, derailing the easing path.
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Market expectations: Overpriced expectations for cuts could lead to volatility if the Fed underdelivers.
FAQs
Q: Did Powell really say the Fed remains on track for more cuts?
A: Yes. Powell affirmed that if labor market weakness continues, the Fed is prepared to lower rates, even as tariffs drive inflation.
Q: Why does Powell believe labor risks are greater than tariff inflation?
A: He sees slower hiring, lower labor force participation, and muted payroll gains as broader threats than inflation limited to goods due to tariffs.
Q: When might the next rate cut happen?
A: Markets are pricing in a strong chance of a 25 basis point cut at the Fed’s October 28–29 meeting.
Q: Are all Fed officials aligned behind cuts?
A: Most appear supportive. Bowman, Collins, and Williams have all publicly endorsed further easing given labor risk.
Q: Will the shutdown affect Fed decisions?
A: Yes. The delay in official data has forced reliance on private sources, adding uncertainty to policy setting.
