Fed Chair Jerome Powell said in a speech overnight that the U.S. labor market is showing a “marked slowing” in both supply and demand, calling it an unusual and challenging development. He noted that job creation now appears to be running below the “breakeven” rate needed to keep unemployment rate stable, though other indicators such as job openings and claims remain broadly steady.
On inflation, Powell stressed that recent price pressures are largely tariff-driven rather than evidence of broad-based overheating. Disinflation in services, including housing, continues, and most longer-term inflation expectations remain anchored around the Fed’s 2% goal. Near-term expectations have edged higher on tariff headlines, but Powell argued these effects are likely to be transitory.
He described the tariff shock as a “one-time shift in the price level” that will be “spread over several quarters” as supply chains absorb higher costs.
Powell reaffirmed that Fed policy is “not on a preset course”. Decisions will continue to depend on incoming data and the balance of risks, with the FOMC seeking to manage both slowing job growth and temporary tariff-related inflation without overreacting.
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