At the latest press conference, Powell noted that the U.S. labor market is experiencing significant cooling: hiring and layoffs are slowing simultaneously, companies are finding it easier to recruit, households' expectations for job opportunities are declining, and the unemployment rate has risen to about 4.4%. Employment growth has weakened noticeably since the beginning of the year, partly due to a slowdown in labor supply, including reduced immigration and a decline in participation rates, but labor demand itself is also weakening.
Regarding inflation, core PCE remains at 2.8% year-on-year, above the long-term target of 2%. Some goods inflation has rebounded due to tariffs, but service inflation continues to show a slowing trend. Although overall inflation has fallen significantly from the 2022 peak, it has not yet reached a level that would fully reassure the Fed. The FOMC cut rates by 25 basis points again and initiated short-term Treasury purchases to maintain ample reserves and ensure the effective operation of policy rates.
Powell emphasized that against the backdrop of rising employment risks and still-high inflation, there is no "risk-free option" for the policy path. The Fed must strike a more delicate balance under the constraints of its dual mandate. He stated that interest rates are nearing the neutral range, and policy will not be preset in the future but will be judged meeting by meeting based on economic data and risk conditions.
