Jay Powell is signaling his support for further interest rate cuts as the US labor market slows

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Jay Powell warned that the US labor market is showing further signs of distress, with the head of the Federal Reserve indicating that he may be ready to support another interest rate cut later this month.

Powell said in Philadelphia on Tuesday that “downside risks to employment have risen” — the strongest hint yet that Fed officials believe they have enough evidence to support another quarter-point cut in the United States. Borrowing costs.

The Fed chairman added that even without new Bureau of Labor Statistics data — which was delayed by the federal government shutdown — privately produced measures of the jobs market, as well as the Fed’s internal research, provided enough reasons to show that the jobs market was slowing.

The Fed chairman said that “available evidence” suggests that “layoffs and hiring remain low,” while “households’ perceptions of job availability and businesses’ perceptions of hiring difficulty continue their downward trajectories.”

Figures from payroll service provider ADP showed companies shed 32,000 jobs in September.

The comments indicate this Powell The Federal Reserve has become more pessimistic about monetary policy, even as many economists worry that the Trump administration’s tariff policy will lead to another wave of inflation across the US economy.

The Standard & Poor’s 500 index recovered from the decline recorded earlier in the session to trade 0.3 percent higher this afternoon in New York. The high-tech Nasdaq Composite was flat.

The central bank last month cut borrowing costs for the first time since December, lowering the target range for federal funds to 4-4.25 percent amid signs that the US labor market is weakening.

The October meeting will be held on October 28 and 29. Investors are betting heavily on another quarter-point cut.

The Fed’s dual mandate requires it to target full employment and inflation at 2 percent.

Powell said on Tuesday that long-term inflation expectations remain “in line with our 2 percent target.”

Although tariffs imposed by President Donald Trump have led to some increases in the prices of imported goods, there have been few signs of “broader inflationary pressures.”

Powell also said the Fed could pause quantitative tightening — under which assets purchased under anti-crisis quantitative easing operations are allowed to take off — “in the coming months,” saying it is “closely monitoring a broad range of indicators to guide this decision.”

Fed Chairman addressed concerns expressed by Treasury Secretary Scott Besent about the ballooning size of the Fed’s balance sheet, saying it was unlikely to return to levels last seen before the coronavirus pandemic.

“Non-reserve liabilities are currently about $1.1 trillion higher than they were immediately before the pandemic, requiring our securities holdings to be equally higher,” the Fed chairman said. “Demand for reserves has also risen, partly reflecting growth in the banking system and the overall economy.”

The central bank’s balance sheet has swollen due to quantitative easing since the global financial crisis, when the Fed sought to stabilize markets by purchasing trillions of dollars of US Treasuries and government-backed mortgage securities.

Quantitative easing policies created an operating model that was “in effect a gain-of-the-job monetary policy experiment,” Besant said in a recent article for the trade publication International Economics.

Powell acknowledged that with “the clarity of hindsight, we could have — and perhaps should have — halted” the quantitative easing implemented during the pandemic sooner, though he added that doing so would not have been enough to “fundamentally change the course of the economy.”