Powell describes rates as ‘modestly restrictive,’ keeping door open to cuts

Fed chair warns ‘there is no risk-free path’ after officials cut rates last week

- Nick Timiraos

Chair Jerome Powell said he judged the Federal Reserve's interest-rate stance as “still modestly restrictive” even after last week’s rate cut, implying more wiggle room to reduce rates this year if officials continue to judge that recent labor-market softness outweighs setbacks on inflation.

Powell, at a talk in Providence, R.I., on Tuesday afternoon, largely reiterated points he made at a press conference following last week's rate cut. He highlighted how the Fed faces challenges in achieving both of its goals to keep inflation low and stable while promoting healthy labor markets.

“Two-sided risks mean that there is no risk-free path,” Powell said. Cutting rates too much, too fast could allow inflation to continue to run closer to 3% than to the Fed’s 2% target, he said, while leaving a restrictive policy stance in place for too long could unnecessarily soften labor markets.

Powell repeated his view that a summer slowdown in job growth warranted last week’s shift toward paying somewhat more attention to the labor market than had been the case earlier this year. While the growth of the labor force has also slowed this year, Powell said the economy this summer hadn't been creating enough new jobs to keep up with the number of people looking for work.