Powell keeps Fed on track to lower interest rates again

Federal Reserve Chair Jerome Powell left the central bank on track to reduce interest rates again at its meeting later this month by highlighting weakness in the job market despite lingering concerns over sticky inflation.

- Nick Timiraos

Powell hinted the Fed may end a campaign to passively cut its asset holdings.

(BLOOMBERG)

Powell said the central bank is trying to balance against two risks that could call for competing policy steps. Cutting rates too quickly could “leave the inflation job unfinished,” but moving too slowly to reduce borrowing costs could spur “painful losses in the employment market,” he said Tuesday at an economics conference in Philadelphia.

“There really isn’t a risk-free path now, since [inflation] appears to be continuing to increase quite gradually...but now the labor market has demonstrated pretty significant downside risks,” Powell said. “Both the supply and demand for labor has declined quite sharply.”

Separately, Powell hinted the central bank could be approaching the end of a more than three-year campaign to shrink a portfolio of Treasury securities that it acquired to provide stimulus after the 2020 pandemic upended the economy.