Powell Signals Another Cut on Weak Hiring

Marvin Loh, Senior Global Macro Strategist at State Street Global Markets, reacts to Federal Reserve Chair Jerome Powell raising bets for Fed's cutting path.

Federal Reserve Chair Jerome Powell signaled the US central bank is on track to deliver another quarter-point interest-rate cut later this month, even as a government shutdown significantly reduces its read on the economy.

Powell, in a speech Tuesday at the National Association for Business Economics annual meeting, said that the economic outlook appeared unchanged since policymakers met in September, when they lowered interest rates and projected two more this year.

“A rate cut in October is done,” said Julia Coronado, founder of the research firm MacroPolicy Perspectives and a former Fed economist. “Nothing has changed the perspective that there’s still downside risks to the labor market.”

Powell pointed several times to the low pace of hiring and noted that it may weaken further.

“You’re at a place where further declines in job openings might very well show up in unemployment,” Powell said during a question-and-answer session following his prepared remarks. “You’ve had this amazing time where you came straight down, but I just think you’re going to reach a point where unemployment starts to go up.”

Expectations for a rate cut in October were little changed after Powell’s remarks. Investors see a nearly 100% chance of a reduction, according to federal funds futures contracts.

The Fed’s September cut to a target range of 4%-4.25% was their first since December, and followed a sharp summer slowdown in hiring. Still, the unemployment rate has so far remained relatively low, ticking up to 4.3% in August. The Labor Department delayed the release of the September payrolls report due to the ongoing government shutdown, but has recalled staff to prepare September consumer price index data for release later this month.

“Right now, the risks to the employment side of the mandate are rising,” Yelena Shulyatyeva, senior US economist at the Conference Board, said on the sidelines of the NABE conference. “That’s what is going to drive the decision in the near term.”

The Fed is scheduled to meet again Oct. 28-29. Last month, the median projection from its 19 policymakers pointed to two more rate cuts this year. But nine officials saw one or fewer cuts as appropriate.

--------

Watch Bloomberg Radio LIVE on YouTube

Weekdays 7am-6pm ET

Follow us on X

Subscribe to our Podcasts:

Bloomberg Daybreak

Bloomberg Surveillance

Bloomberg Intelligence

Balance of Power

Bloomberg Businessweek

Listen on Apple CarPlay and Android Auto with the Bloomberg Business app:

Apple CarPlay

Android Auto

Visit our YouTube channels:

Bloomberg Podcasts

Bloomberg Television

Bloomberg Originals