WASHINGTON — Federal Reserve Chair Jerome Powell told U.S. business leaders that mounting downside risks to the labor market were a key factor behind last week’s interest rate cut, describing the move as another step toward a more neutral policy stance.
Powell said the shift in the balance of risks made it clear there was no path “free of risk” for monetary policy. While the current stance remains somewhat restrictive, he argued it leaves the Fed well-positioned to respond to potential economic developments.
The Fed chair acknowledged that U.S. economic growth has slowed and that downside risks to employment have increased, even as inflation remains elevated. “Inflation has ticked higher and continues to run somewhat above our target,” Powell noted, underscoring the delicate balance policymakers face.
He also pointed to signs of weakness in consumer spending, with many companies reporting that heightened uncertainty is weighing on their outlook. At the same time, Powell observed that rising commodity prices reflect, in large part, the impact of new trade tariffs.
Despite these headwinds, Powell stressed that the Fed’s current approach aims to carefully balance its dual mandate of supporting employment and maintaining price stability. The recent rate cut, he suggested, should be seen as part of that gradual recalibration.
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