Federal Reserve Faces Tough Choices Amid Inflation and Job Market Struggles

Washington — The Federal Reserve is navigating a complex economic landscape as it attempts to control inflation while also supporting the job market, Chair Jerome Powell said Tuesday.

“There is no risk-free path for policy as we navigate the tension between our employment and inflation goals,” Powell stated in remarks prepared for an event hosted by the National Association for Business Economics.

Powell highlighted the challenges stemming from President Donald Trump‘s policies on trade, immigration, and government spending, which have placed the central bank in a difficult position. According to data from the Commerce Department, Trump’s tariffs are affecting economic stability, leading to more small businesses planning price increases, a survey from the National Federation of Independent Business revealed.

As the situation unfolds, signs of a weakening labor market have become apparent. Job growth has slowed recently, with many individuals remaining unemployed for extended periods. Currently, there are more job seekers than available openings.

The ongoing federal government shutdown has further complicated matters by halting the release of key economic data that the Federal Reserve relies on for informed decision-making.

Despite these challenges, Powell assured that the Fed continues to analyze various public and private-sector data and maintains a network of contacts through the Reserve Banks for insights. “Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago,” he added.

In response to the economic climate, Fed officials lowered borrowing costs recently while cautioning about the risks to both inflation and employment. “If we move too quickly [with lowering rates], then we may leave the inflation job unfinished and have to come back later and finish it,” Powell noted. “If we move too slowly, there may be unnecessary losses, painful losses, in the employment market.”

Internal debates among Fed officials reflect the complexities of policy decisions. Governors Michelle Bowman and Christopher Waller, both Trump appointees, dissented in July, advocating for a rate cut instead of maintaining the status quo. This marked the first instance of multiple dissenting votes on a policy decision since 1993. In September, Gov. Stephen Miran, who is closely aligned with Trump, suggested a deeper rate cut of half a point instead of a quarter point.

<p“We have a healthy debate going,” Powell said Tuesday.