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A sharp slowdown in hiring is posing a growing threat to the US economy. federal Reserve Chair jerome powell That said on Tuesday, it is a sign that the Fed will cut its key interest rate twice more this year.
Powell said in written remarks that despite a cut in official economic data due to the federal government shutdown, “the outlook for employment and inflation has not changed much since our September meeting,” when the Fed lowered its key rate for the first time this year.
Fed officials at that meeting also projected that the central bank would lower its rates twice this year and once in 2026. The Fed’s low rates could reduce the cost of borrowing for mortgages, car loans and business loans. Powell was speaking before a meeting of the National Association of Business Economics philadelphia,
Powell reiterated the message he first gave after their September meeting, when he indicated the Fed was a little more concerned about the job market than about its other congressional mandate, which is to keep prices stable. The tariffs have pushed the Fed’s preferred measure of inflation up to 2.9%, he said, but there isn’t “broad inflationary pressure” outside of the duties that will keep prices high.
“The increasing downside risks to employment have changed our assessment of the balance of risks,” he said.
Separately, Powell spent much of his speech defending the Fed’s practice of long-term purchases treasure Bonds and mortgage-backed securities in 2020 and 2021, which were intended to lower long-term interest rates and support the economy during the pandemic.
Yet those purchases have come under criticism from the Treasury Secretary scott bettingThe Trump administration has also shortlisted some candidates to replace Powell when his term as president ends next May.
Powell defended the purchases and said they were intended to avoid a collapse in the market for Treasury securities, which could have caused interest rates to rise too high.