Powell: Slowdown in U.S. Hiring Signals Need for More Rate Cuts

A Warning Sign for the Economy

Federal Reserve Chair Jerome Powell signaled growing concern Tuesday over a sharp slowdown in U.S. hiring, suggesting the central bank may move forward with two additional interest rate cuts this year. Speaking before the National Association of Business Economics in Philadelphia, Powell said that despite the ongoing government shutdown limiting access to official data, the broader outlook for employment and inflation remains largely unchanged since September.

Focus Shifts to Job Market Stability

Powell reiterated that the Federal Reserve now views risks to the labor market as outweighing inflation concerns. Tariffs have pushed inflation to 2.9%, but Powell said there are no “broader inflationary pressures” threatening to keep prices elevated. He added, “Rising downside risks to employment have shifted our assessment of the balance of risks,” signaling that the Fed may act soon to prevent further job losses and economic cooling.

Adjusting Monetary Policy Tools

In addition to potential rate cuts, Powell noted the Fed could soon halt the ongoing reduction of its $6.6 trillion balance sheet. The central bank has been allowing roughly $40 billion in Treasuries and mortgage-backed securities to mature monthly without replacement—a policy that could soon change to ease long-term borrowing rates.

Responding to Critics

Powell also defended the Fed’s bond-buying measures during the pandemic, acknowledging that while “we could have—and perhaps should have—stopped asset purchases sooner,” those decisions were aimed at stabilizing financial markets during unprecedented uncertainty.