Fed Chair Powell Signals More Rate Cuts Amid Hiring Slowdown Concerns

Powell Addresses Economic Risks in Philadelphia

Federal Reserve Chair Jerome Powell announced on Tuesday, October 14, 2025, that the central bank is likely to implement two additional interest rate cuts this year. Speaking before the National Association for Business Economics (NABE) annual meeting in Philadelphia, Powell highlighted a 'sharp slowdown in hiring' as a significant and growing risk to the U.S. economy.

This announcement follows the Fed's initial rate reduction in September, which lowered the benchmark interest rate to a range of 4%-4.25%. Powell's comments signal a continued focus on the labor market, which he indicated is now a greater concern than inflation, despite tariffs having pushed the Fed's preferred inflation measure to 2.9%.

Shifting Priorities and Monetary Policy Outlook

Powell reiterated a message first delivered after the September meeting, emphasizing that the Fed is 'slightly more worried about the job market' than its mandate to maintain price stability. The slowdown in hiring, with job creation 'below trend given the pace of economic growth,' presents 'rising downside risks to employment' that have altered the Fed's assessment of economic balance.

Lowering interest rates is expected to reduce borrowing costs for consumers and businesses, thereby encouraging expansion, hiring, and purchases of homes and automobiles. Fed officials had previously projected two more cuts in 2025 and an additional one in 2026.

Challenges and Market Expectations

The Federal Reserve faces an additional challenge due to an ongoing federal government shutdown, which has limited access to official economic data. In the absence of this 'gold standard' data, the central bank is relying on alternative sources and a network of business contacts to inform its policy decisions.

Financial markets have largely anticipated these moves, with expectations for another quarter-point cut at the upcoming October 28-29 meeting reaching 'nearly a 100% probability.' Following this, the Fed has one more rate decision meeting scheduled for December 10.

Beyond interest rates, Powell also hinted at a potential shift in the Fed's balance sheet policy, suggesting the central bank may soon cease shrinking its roughly $6.6 trillion balance sheet to preserve liquidity. This would mark a significant pivot in strategy, prioritizing financial system stability.