① Federal Reserve Chairman Jerome Powell stated that the 25-basis-point interest rate cut was a risk management decision and there is no need for rapid rate adjustments; ② Powell noted a slowdown in the U.S. economy, persistently high inflation, and increased downside risks in the labor market, with the Fed placing greater emphasis on its 'maximum employment' objective.
On Wednesday Eastern Time, following the Federal Reserve's expected 25-basis-point rate cut, Chairman Jerome Powell delivered remarks, stating that today’s rate cut was a risk management decision and there is no need for rapid rate adjustments. This indicates that the Fed is not entering a sustained easing cycle, which cooled market sentiment, causing the Nasdaq to fall by more than 1% at one point during trading.
At the press conference, Powell pointed out that economic growth in the first half of the year has slowed, while inflation levels 'have risen and remain elevated'; meanwhile, downside risks in the labor market have also increased, with the labor market becoming less active and slightly weaker.
Powell emphasized that given clear signs of cooling in the labor market, the central bank, within its dual mandate, is gradually shifting from a long-term focus on curbing inflation toward greater attention to the 'maximum employment' goal.
He noted that since April, the risk of persistently high inflation has eased somewhat, partly due to slower job growth. He also mentioned that the Fed’s baseline view is that the impact of tariffs on inflation may only be temporary. On the other hand, downside risks in the labor market are rising and seem to have fallen below the so-called 'breakeven level' needed to maintain a stable unemployment rate.
Powell stated that he does not want further weakening in the labor market, and rising unemployment among minority groups is one concerning sign.
Powell admitted that the central bank faces a 'dilemma that is both difficult and rare': the labor market is weakening, yet inflation remains high. Typically, a weakening labor market would call for interest rate cuts to stimulate growth, while persistently high inflation requires a tighter policy stance.
“This is a classic case of two-sided risks, where there simply is no risk-free path.” This divergence is directly reflected in the Federal Reserve’s quarterly Summary of Economic Projections, where officials show broad disagreement on the outlook for interest rates.
When asked whether the Trump administration’s mortgage fraud case against Federal Reserve Governor Lisa Cook undermines the Fed’s independence, Powell chose to sidestep the question. “I think this is a court case, and it is inappropriate for me to comment.”
When asked what signs the public should look for to judge whether the Fed has lost its independence, Powell gave a succinct response: “Just watch what we do.”
Powell stated, 'Working based on data and never considering other factors is at the core of our culture. Everyone who has worked at the Federal Reserve deeply understands this. You can see it in the way we communicate, in officials' speeches, and in the decisions we make.'
He emphasized that although Washington is undoubtedly a politically charged environment, the Federal Reserve is an exception, and this will not change. 'We never frame or interpret these issues through political outcomes. Elsewhere in Washington, everything tends to be viewed through a political lens. It’s hard for people to believe, but the Fed doesn’t think that way at all.'
Despite a series of actions taken by Trump against the Federal Reserve—including publicly criticizing the Fed and Powell, and installing his economic advisor Stephen Moore into the Board of Governors—Powell stressed that he does not believe the Fed will become politicized. 'I don’t think we’ll reach that point; we’re still doing our work as usual.'
Notably, Moore was the only official to oppose the 25-basis-point rate cut in this decision, as he advocated for a more aggressive 50-basis-point cut. In response, Powell commented that there was no broad support during this week’s meeting for a larger, 50-basis-point reduction.
'Over the past five years, we’ve implemented very significant interest rate hikes and cuts, typically when policy was clearly misaligned and needed rapid adjustment to a new level. But that is absolutely not the case now. I believe our policy has been on the right track throughout this year.'
Regarding the impact of tariffs, Powell noted that the tariffs imposed by Trump seem to be primarily paid by importing companies, meaning consumers have yet to see significant price increases related to the tariffs. 'The impact on consumers has been quite minimal, slower and smaller than we anticipated.'
Powell pointed out, however, that companies have indicated they ultimately plan to pass on more of the increased costs to consumers, which could lead to higher prices.
Editor/joryn