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Fed Chair Powell calls rate policy ‘restrictive,’ cites job concerns and warns on ‘no risk-free path’
Federal Reserve Chair Jerome Powell calls current rate policy “restrictive,” warns of job market risks, and urges caution on future interest rate cuts.
Federal Reserve Chair Jerome Powell introduced a modest interest rate cut last week. However, he urged caution, referring to the current monetary policy as “still modestly restrictive,” reported the Wall Street Journal.
Despite repeated calls from US President Donald Trump to lower rates more aggressively, the Federal Reserve made only a small reduction this month.
Powell’s latest remarks were delivered during a speech in Providence, R.I., on Tuesday afternoon. He pointed to growing caution around the US labor market. Depending on the ease in inflation this year, Powell believes there could be further rate cuts in the coming months.
He also addressed the challenge of balancing between lowering inflation and supporting job growth. Powell made it clear that the path forward remains uncertain.
“No risk-free path,” warns Federal Reserve Chair
Powell has consistently resisted rapid rate cuts, citing risks to the labor market. Speaking on the dual challenges of inflation and employment, he said, “Two-sided risks mean that there is no risk-free path.”
He elaborated that while reducing interest rates may seem appealing, it carries potential risks, such as reigniting inflation. At the same time, keeping a restrictive policy in place for too long could “unnecessarily soften labor markets.”
The labor force has also shown signs of strain. Powell has also addressed the issue of lower jobs this year. This shortfall has raised concerns about the overall strength of the labor market.
What to expect from the next Fed Meeting?
After introducing the rate cut in September, the first in a while, the Federal Reserve’s next meeting is scheduled for October 28-29. While Powell has avoided making any firm predictions, the Fed is expected to review updated data on economic growth, hiring, and inflation.
In Powell’s own words, the meeting will likely center on the question, “Is our policy in the right place? And if not, we move it there.”
Also Read: Dovish in the dark, Fed promises more cuts
The Federal Reserve has faced increasing criticism from President Trump and senior officials, including Treasury Secretary Scott Bessent. The Trump administration argues that the Fed is being too cautious to inflation trends. Trump has repeatedly slammed Powell for being “too slow”. His officials have claimed the central bank is failing to act decisively. Despite the political pressure, Powell has continued his measured approach.
Also Read: Wall Street mixed ahead of Jerome Powell's comments on rate-cut; Dow, S&P 500 hit record high
FAQs
Could the Federal Reserve announce more interest rate cuts this year?
The Fed Chair has suggested that the rate cuts could depend on lowered inflation. However, he has not assured any future rate cuts.
When is the next Federal Reserve meeting?
The next Fed Reserve meeting is scheduled for October 28-29.
Why does the Donald Trump administration criticize the Federal Reserve on rate cut?
The Trump administration argues that the Fed is being too cautious to inflation trends and failing to act decisively on rate cuts.
