With inflation and jobs in ‘tension,’ Powell warns of the Fed’s tightrope on interest rates

By Bryan Mena, CNN

Washington (CNN) — The Federal Reserve is doing a difficult balancing act, trying to tamp down inflation while lifting up 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 said in prepared remarks for an event hosted by the National Association for Business Economics.

President Donald Trump’s sweeping policies on trade, immigration and government spending have thrust the world’s most powerful central bank into a tricky situation rarely seen since it was established more than a century ago.

Trump’s tariffs have already pushed up some prices, according to Commerce Department data, and in September, more small businesses said they’re planning price hikes in the coming months, a survey from the National Federation of Independent Business on Tuesday showed.

Meanwhile, there have been mounting signs of a weakening labor market. Job growth in recent months has been anemic, people are staying unemployed for longer, and there are now more unemployed people seeking work than there are job openings.

To make matters more complicated, the shutdown of the federal government has suspended the release of most official economic data, which the Fed relies on to understand the economy.

Powell said the Fed looks at “a wide variety of public- and private-sector data that have remained available” and that “we also maintain a nationwide network of contacts through the Reserve Banks who provide valuable 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.

Fed officials lowered borrowing costs for the first time this year in September, when they also warned about the risks to both inflation and jobs.

“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 said during the event. “If we move too slowly, there may be unnecessary losses, painful losses, in the employment market.”

Fed officials themselves are debating how best to steer the economy.

Fed governors Michelle Bowman and Christopher Waller — both Trump appointees — cast dissenting votes in July, backing a rate cut instead of holding steady. It was the first time more than one Fed governor dissented on a policy decision since the 1993.

In September, Fed Governor Stephen Miran, a close Trump ally who was sworn in an hour before the latest Fed interest-rate meeting, wanted to lower rates by half a point instead of a quarter point.

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

The-CNN-Wire
™ & © 2025 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.