The president of the US Federal Bank (Fed), Jerome Powellstated on Tuesday that the labor market weakness outweighs concerns about persistent inflationleading to the decision he supported last week for Reduce interest rates by 25 basis points. It is recalled that the first reduction of interest rate The Federal Open Market Committee (FOMC) for this year has been made amid indications that both the supply and the demand for labor are declining, while the short -term impact of duties has led to an increase in inflation.

In such cases, as Powell said in his speech to the funders, the role of the Fed is to “balance the two sides of its dual mission” for constant prices and low unemployment. “The short -term risks to inflation are moving upward and the risks to downward. A difficult situation, “he said.

The conditions described by Powell in his speech are in line with stagnation, where growth slows down and inflation is high. Although the current situation is much less serious than the US faced in the 1970s and early 1980s, it is still a political challenge for the Fed, according to CNBC.

Powell, however, said he was satisfied with the current policy of the Central Bank, although he referred to the possibility of additional reductions, if FOMC deems it necessary to adopt a more different attitude.

“The increased risks to employment have shifted the balance of risks to achieve our goals,” he said. “This political attitude, which I still consider moderately restrictive, keeps us in a good position to respond to possible economic developments,” he said.

Job market and inflation

Referring to the labor market, Powell spoke of a “significant slowdown” in supply and demand. “In this less dynamic and slightly weaker job market, the risks to employment have increased,” he warned.

Meanwhile, inflation has fallen significantly from the highest level of the last 40 years recorded in 2022, but is still above the 2% Fed target. The Ministry of Commerce data on Friday are expected to show that consumer goods prices increased by 2.7% annually for all species and by 2.9% excluding food and energy, Powell said.

The impact of the duties imposed by US President Donald Trump is also added to the uncertainty. Trump continues to negotiate with US trade partners on the final level of duties, with the critical deadline for China approaching in early November. Fed economists are currently considering duties as a temporary reason for raising prices, though this may change.

“The uncertainty about the course of inflation remains high,” Powell said. “We will evaluate and carefully manage the risk of higher and more persistent inflation. We will ensure that this increase in prices does not evolve into a constant inflation problem. “

It is noted that Powell is leading a Fed that has received strong criticism from the White House and is facing an unusually large difference of opinions between officials. The FOMC meeting ended with the participants divided into two nearly equal groups, 10-9, whether one or two additional reductions would be 0.25% this year. The appointed by Trump Steven Miran has pushed for a much more aggressive attitude, but his term in the Fed expires in January.