Federal Reserve Signals Further Interest Rate Cuts Amid Slowing Job Growth

Federal Reserve Chair Jerome Powell indicated today that the central bank is likely to cut its key interest rate twice more this year, citing a slowdown in hiring as a growing risk to the U.S. economy.

Speaking in Philadelphia, Powell stated that despite the recent federal government shutdown impacting economic data collection, “the outlook for employment and inflation does not appear to have changed much since our September meeting,” when the Fed lowered rates for the first time this year. This move comes as the Fed balances its dual mandate of price stability and maximum employment. Officials previously forecasted two additional rate reductions this year and one in 2026. Lower rates typically translate to reduced borrowing costs for consumers and businesses alike.

Powell acknowledged that tariffs have pushed the Fed’s preferred inflation measure to 2.9%, but emphasized there are no “broader inflationary pressures” beyond those duties. He noted a shift in the Fed’s assessment, stating, “Rising downside risks to employment have shifted our assessment of the balance of risks.” Economists at JPMorgan Chase confirmed the expectation of further cuts, with chief U.S. economist Michael Feroli saying today’s remarks were “strong confirmation” of a rate cut at the next meeting, scheduled for October 28-29. You can learn more about the Federal Reserve’s structure and functions on their official website.

The Fed is also considering halting the reduction of its $6.6 trillion balance sheet, a move that could further lower borrowing costs. Powell also addressed past criticism regarding the Fed’s bond purchases during the pandemic, admitting, “With the clarity of hindsight, we could have—and perhaps should have—stopped asset purchases sooner,” but maintained those purchases were intended to avoid market disruption. Concerns about the Fed’s policies have been raised by figures like Treasury Secretary Scott Bessent, as reported by Reuters.

Powell stated the central bank will continue to monitor economic data and assess the need for further adjustments to monetary policy.