Powell: The call for a 50 basis point rate cut is not high, and the substantial risk is the decline in employment (full text attached)

Summary of the regular press conference of Powell on September 17: 1. Monetary Policy: Today's action is a risk management type of rate cut. The support for a 50 basis point rate cut from the FOMC is not strong. 2. Dot Plot: The unusual economic situation has led to large differences in Fed rate forecasts. 3. Labor Market: Revised employment data suggests that the labor market is no longer as stable. Unemployment rate is still low but rising; job growth has slowed down, and downside risks have increased. Indicators in the labor market suggest substantial downside risks, with artificial intelligence possibly contributing to the slowdown in hiring. 4. Inflation: Transmission of tariff inflation has slowed down, and the impact has become smaller. The possibility of "persistent tariff inflation" has decreased. Expected US August PCE inflation rate to rise by 2.7% yoy, and core PCE to rise by 2.9% yoy. It is expected that deflation will continue in the service sector. Long-term inflation expectations are stable. 5. Fed Independence: The Fed is firmly committed to maintaining its independence. It would be inappropriate to discuss lawsuits between Fed Governor Cook and President Trump; no comments on the criticisms from Treasury Secretary Benson or Fed's internal audit calls as requested by him, but the Fed may further reduce staffing. FOMC remains united in pursuing its dual mandate responsibilities. 6. Tariffs: Tariffs are expected to contribute 0.3-0.4 percentage points to core PCE inflation data. On Wednesday, September 17, the Federal Reserve announced after the FOMC meeting that the federal funds rate target range had been lowered from 4.25%-4.5% to 4.0%-4.25%, a 25 basis point cut. This marks the first rate cut in six FOMC meetings since the beginning of the year. Powell stated that while the unemployment rate remains low, there has been a slight increase, with job growth slowing down and increased downside risks in the employment market. Inflation has also seen an uptick, though still slightly above normal levels. Additionally, the Fed announced plans to continue reducing its securities holdings. During the Q&A session, Powell mentioned that the Fed's actions are a form of risk management type of rate cut. He highlighted the concerns about the labor market, where job growth has slowed and there are increasing downside risks. Despite the recent uptick in inflation, the Fed remains focused on its dual mandate of maximum employment and price stability. Powell also addressed concerns about Fed independence and the impact of tariffs on inflation. Overall, the Fed's decision to cut rates and the rationale behind it were based on the changing economic conditions and risks in the labor market. Powell emphasized the Fed's commitment to its dual mandate and the need to balance the risks of inflation and employment. The Fed remains vigilant in monitoring economic developments and making data-driven decisions to support the economy.