Powell: Employment is weakening, inflation remains high, and no one is talking about rate hikes now

At the latest press conference, Powell pointed out that the U.S. labor market is experiencing a significant cooling: both hiring and layoffs are slowing down, companies are finding it less difficult to recruit, and households' expectations for job opportunities are also declining, with the unemployment rate rising to about 4.4%. Employment growth has weakened significantly compared to the beginning of the year, partly due to a slowdown in labor supply, including reduced immigration and participation rates, but labor demand itself is also weakening.

In terms of inflation, the core PCE year-on-year remains at 2.8%, which is above the long-term target of 2%. Some goods inflation is rising due to increased tariffs, but service inflation continues to show a slowing trend. Although overall inflation has fallen sharply from its 2022 peak, it has not yet reached a level that would make the Federal Reserve completely confident. The FOMC has cut rates by another 25 basis points and has also 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 policy paths, and the Federal Reserve must strike a more delicate balance under the constraints of its dual mandate. He stated that interest rates are now close to the neutral range, and future policy will not be predetermined but will be assessed meeting by meeting based on economic data and risk conditions.