Powell's rate cut signal reflects economy's delicate position

Fed chair's measured approach leans toward cautious easing amid 'curious' labor market

- Nick Timiraos

Federal Reserve Chair Jerome Powell cautiously laced up an interest-rate cut next month but delivered a subtle message to anyone expecting aggressive easing: Don't expect a downhill sprint.

The debate among central bankers gathered in Wyoming's Grand Teton National Park over the past two days suggests the focus is now shifting beyond the September meeting to whether the Fed will entertain cutting again at either of its final two meetings of the year, in October and December.

Powell's cautious tone reflected the tricky economic dynamics the Fed is grappling with: a labor market he described as showing "curious" signs of softness despite a low unemployment rate, and tariff-driven price increases that are just beginning to work their way through the economy.

Powell's stance appeared to mark his first public attempt this year to shape a consensus among colleagues who disagree over what to do. A few want slightly more-aggressive cuts and others question whether the Fed should be cutting at all with inflation heading toward 3%—away from the 2% target.

In a closely watched speech on Friday, Powell pushed back against two arguments that have been made recently to play down worries about the labor market and to build up the case against cutting.

First, he said the labor market's apparent stability masked unusual underlying weakness, with both the supply of workers and the demand for them declining simultaneously. The question is whether falling demand mostly reflects fewer people looking for work—for example, due to tighter curbs on immigration, as several colleagues who are reluctant or opposed to cutting rates have argued.