Fed Chair Jerome Powell reinforced expectations for another rate cut later this month. Speaking overnight, he said that based on available information despite government shutdown, the outlook for growth, employment, and inflation “has not changed much.”
Powell pointed out that hiring momentum has weakened, with payroll gains “slowed sharply” over the past several months. He attributed this partly to structural factors such as lower immigration and participation, which have constrained workforce growth. Even though layoffs remain subdued, Powell warned that the “downside risks to employment appear to have risen,” citing survey evidence that households see fewer job openings and firms report less hiring difficulty.
On inflation, Powell noted that price pressures remain contained. The latest surveys and data indicate that goods price increases are “primarily reflect tariffs rather than broader inflationary pressures”. While short-term inflation expectations have edged higher this year, long-term expectations remain well anchored around the Fed’s 2% target.
Taken together, Powell’s tone is balanced but leaning dovish. Fed fund futures continue to see over 90% change of another 25bps cut to 3.75-4.00% on October 29.
