"US economy stable" - Federal Reserve Chairman: But the labor market remains weak
US Federal Reserve Chairman Jerome Powell said the US economy may be on a more stable trajectory than expected, but the labour market remains weak, with both hiring and layoffs low. At a conference of the National Association for Business Economics in Philadelphia, he said monetary policy would be determined "meeting by meeting".
Powell stressed that Fed officials are divided between those who worry about rising inflation and those who see a rapidly weakening labor market. He noted that while recent economic data has been stronger than expected, it has not translated into an increase in hiring. “There is a tension between the weak labor market data and continued strong consumption,” he said.
Another difficulty for analyzing the economic situation is the partial shutdown of the US government, which has suspended the publication of some official data. However, Powell stressed that the Fed still has enough information to make decisions at the next monetary policy meeting on October 28-29.
According to him, the available data do not show any major change in the outlook for employment or inflation compared to the last Fed meeting in September, where the base interest rate was lowered by 0.25 percentage points.
Powell's comments did not change investors' expectations, who expect another 0.25 percentage point cut in interest rates at the end of the month. Analysts say he is preparing markets for a possible series of cuts, but not necessarily consecutive ones.
Powell also highlighted the internal debate at the Fed, with about half of officials predicting only one or no further rate cuts this year, while the rest think two or more cuts are needed. This highlights the challenge the Fed faces in trying to achieve its 2% inflation target while protecting the job market.
Although the official September jobs report is delayed, Powell said data from public and private sources show that hiring and layoffs remain at low levels, while the perception of households and businesses about the labor market has worsened.
Regarding high inflation, the Fed head underlined that part of it comes from rising commodity prices, which are more related to trade tariffs than to broader inflationary pressures.
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