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Washington (AP) Federal Reserve Chairman Jerome Powell said on Tuesday that a sharp slowdown in hiring poses growing risks to the U.S. economy, suggesting the central bank could cut interest rates two more times this year.
In written remarks, Powell said that while the federal shutdown has cut off official economic data, “the outlook for jobs and inflation does not appear to have changed much since our September meeting,” when the Fed lowered key interest rates for the first time this year.
Fed officials at the meeting also predicted the Fed would cut interest rates two more times this year and once in 2026. Lower interest rates from the Federal Reserve could lower borrowing costs for mortgages, auto loans and business loans. Powell spoke at the National Association for Business Economics conference in Philadelphia.
Powell reiterated a message he first conveyed after the September meeting, when he said the Fed was slightly more concerned about the job market than Congress’ other mandate, namely maintaining price stability. He said the tariffs have raised the Fed’s preferred inflation gauge to 2.9%, but there are no “broader inflationary pressures” outside of the tariffs to keep prices high.
“The rise in downside risks to employment changes our assessment of the balance of risks,” he said.
Powell also said the central bank may soon stop shrinking its balance sheet of about $6.6 trillion. The Fed allows about $40 billion in Treasury and mortgage-backed securities to mature each month but does not replace them. The shift could put pressure on long-term Treasury rates.
Separately, Powell spent much of his speech defending the Fed’s purchase of long-term Treasury bonds and mortgage-backed securities in 2020 and 2021, a move aimed at lowering long-term interest rates and supporting the economy during the epidemic.
However, the purchases have drawn fierce criticism from Treasury Secretary Scott Bessant and some of the candidates the Trump administration has put forward to replace Powell when his term ends next May.
In a wide-ranging critique published earlier this year, Bessant said heavy bond buying during the pandemic had boosted stock markets and thereby increased inequality without delivering clear benefits to the economy.
Other critics have long argued that the Fed carried out purchases for too long, keeping rates low even as inflation began to surge in late 2021. The Fed halted purchases starting in 2021 and then sharply raised borrowing costs to combat inflation.
“In hindsight, we could have — and perhaps should have — halted asset purchases earlier,” Powell said. “Our real-time decisions were intended to serve as insurance against downside risks.”
Powell also said the purpose of buying Treasury bonds is to avoid a collapse of the Treasury market, which could lead to a sharp rise in interest rates.
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Last modified: October 14, 2025
