Federal Reserve Chairman Powell Speaks Out:
The U.S. Federal Reserve has lowered interest rates by 0.25% in a move aimed at boosting economic growth, despite a mixed picture of financial stability. The decision comes as Fed Chair Jerome Powell paints a rather gloomy picture of the US economy, highlighting weaknesses in the housing market, consumer spending, and labor market.
During a press conference, Powell stated that both demand for labor and supply have decreased significantly, and the revised employment numbers indicate that the labor market is no longer stable. He also emphasized the increase in goods prices due to tariffs and warned about persistent inflation due to these same tariffs.
However, Powell did not announce further rate cuts during the press conference, and he emphasized that the market prices the interest rate path, not just a single move. He also acknowledged that a wide range of views is natural in the current situation.
On a positive note, this week's data shows stronger-than-expected consumer spending, and households and banks are in very good condition. The annual revision of employment numbers is almost exactly in line with expectations, and long-term inflation expectations remain very stable.
Powell also touched on the topic of artificial intelligence (AI) as a potential reason for the decline in job openings. He noted that much of the decline in employment reflects the decline in the labor force.
In terms of tariffs, Powell said they contribute 0.3-0.4 percentage points to the core PCE. He did not comment on the Treasury Secretary's remarks, but he did emphasize the need for the Fed to look through the windshield, not the rearview mirror.
The Fed's median projection now shows only one rate cut in 2026, less than expected. Individual Fed members like Stephen Miran have been mentioned in the context of influencing rate cut debates, but the specific name of the person who expects only one cut is not explicitly identified in the sources provided.
The BLS is working intensively to address the factors behind the job revisions, and Powell did not comment on the Cook case, deeming it inappropriate to do so.
In conclusion, the U.S. Federal Reserve has cut interest rates in a bid to stimulate economic growth, but the outlook remains mixed. The labor market, housing market, and consumer spending are all facing challenges, but there are also signs of strength in the economy, particularly in consumer spending and the stability of households and banks. The Fed will continue to monitor the situation closely and make decisions based on the data at hand.
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